Transcript STATUTORY AUDITOR

STATUTORY AUDITOR
WHAT IS STATUTORY AUDIT?
A legally required review of the accuracy
of a
company's or government's financial records. The
purpose of a statutory audit is the same as the purpose
of any other audit - to determine whether an organization
is providing a fair and accurate representation of its
financial position by examining information such as bank
balances,
bookkeeping
records
and
financial
transactions.
For example, a state law may require all municipalities to
submit to an annual statutory audit examining all
accounts and financial transactions and to make the
results of the audit available to the public. The purpose
of such an audit is to hold the government accountable
for how it is spending taxpayers' money.
A legally required
review of the accuracy of a
company's or government's financial records.
to determine whether an organization is providing a
fair and accurate representation of its
financial position
by examining information such as MAINLY CASH FLOW
STATEMENTS, bank balances, bookkeeping records and
financial transactions.
MILLION DOLLAR QUESTION:
WHO CAN DO STATUTORY AUDIT?
SECTION 226 OF COMPANIES ACT 1956 provides that
A person shall not be qualified for appointment as auditor of a
company unless he is a chartered accountant
within the meaning of the Chartered Accountants Act, 1949
(38 of 1949) (read with Regulations 4):
Provided that a firm whereof all the partners practising in
India are qualified for appointment as aforesaid may be
appointed by its firm name to be auditor of a company, in
which case any partner so practising may act in the name of
the firm.
SKIP NEXT SLIDE
The logo consists of:
the letters ‘CA’ (have been put in blue, the corporate colour, also
denotes creativity, innovativeness, knowledge, integrity, trust, stability
and depth)
With a “tick mark (up-side down)”
(typically used by
Chartered Accountants, has been included to symbolise the wisdom and
value of the professional. The green colour in the tick mark signifies
growth, prosperity, harmony and freshness).
inside a “rounded rectangle” with white background.
CHARTERED ACCOUNTANTS
AND THEIR ROLES
Whether you are an accountant, engineer or surveyor,
being ‘chartered’ means you are recognized as being
at the top of your chosen profession. It shows you
have industry specific skills and experience, not just
academic and theoretical knowledge. Being a
chartered accountant is so much more than just
‘balancing the books’. They are respected for their
understanding of complex financial information, and
trusted for their strategic business advice.
Chartered accountants work at the highest levels, across all
industry sectors, providing valuable financial and business
advice. They are finance directors, CEOs and partners of some of
the world’s largest organizations.
For a Chartered Accountant – Opportunities are endless.
To a Chartered Accountant – Skills and experience gives success
in any career you choose.
By a Chartered Accountant – Value of any organization, of any
size in the world is added and new markets are explored.
So, Finally
Being a Chartered Accountant – get respected and trusted for
strategic advice and financial Expertise.
WHY THEY ARE SO HOT/COOL
(DEMANDED)?
Charted accountants are the most demanded
professionals in any industry because:-.
1. They can handle some specialized areas like
corporate accounting, taxation, finance,
corporate laws and auditing.
2. They are experts in dealing with situations
and areas which involve procedures of income
tax, service tax, and indirect taxes.
3. They can make a great career as management
consultants as they are highly technically
equipped.
LETS GO BACK TO THE QUALIFICATION OF
AUDITORS AS PER COMPANIES ACT
QUALIFICATION-SECTION 226
SECTION 226(3) PROVIDES THAT: None of the following persons
shall be qualified for appointment as auditor of a company—
(a) a body corporate;
(b) an officer or employee of the company;
(c) a person who is a partner, or who is in the employment, of an officer
or employee of the company;
(d) a person who is indebted to the company for an amount exceeding
one thousand rupees, or who has given any guarantee or provided any
security in connection with the indebtedness of any third person to the
company for an amount exceeding one thousand rupees;
(e) a person holding any security of that company after a period of one
year from the date of commencement of the Companies (Amendment)
Act, 2000.
Explanation.—For the purposes of this section, "security" means an
instrument which carries voting rights:]
Explanation.—References in this sub-section to an officer or employee
shall be construed as not including references to an auditor.
WHO WILL APPOINT STATURORY AUDITOR?
ANSWER:
OWNER OF THE COMPANYi.e. SHAREHOLDERS
SHAREHOLDERS TO
APPROVE THE APPOINTMENT OF THE STATUTORY AUDITOR.
THE COMPANIES ACT 1956 EMPOWERS THE COMPANY’
HENCE SECTION 224 PROVIDES THAT Every company shall, at
each annual
general meeting, appoint an auditor or auditors to hold office from the
conclusion of that meeting until the conclusion of the next annual general
meeting
Every auditor appointed shall within thirty days of the receipt from the
company of the intimation of his appointment, inform the Registrar in writing
that he has accepted, or refused to accept, the appointment. e-Form 23B,
Companies (Central Government's) General Rules and Forms, 1956.
LETS REVIEW THE DEFINITION OF STATUTORY AUDIT ONCE
AGAIN?
A legally required
review of the accuracy of a
company's or government's financial records.
to determine whether an organization is providing a
fair and accurate representation of its
financial position
by examining information such as MAINLY CASH FLOW
STATEMENTS, bank balances, bookkeeping records and
financial transactions.
NOW THE QUESTION MIGHT COME INTO THE MIND THAT
THERE SHOULD BE SOME POWERS AND DUTIES OF
AUDITORS SINCE IT IS LEGALLY REQUIRED.
SUMMARIZATION OF POWER AND DUTIES OF AUDITORS (SEC.227)
•right of access at all times to the books and accounts and
vouchers of the company
•shall be entitled to require from the officers of the company
such information and explanations as the auditor may think
necessary for the performance of his duties as auditor.
•the auditor shall inquire as per Section 227 (1A)
•the auditor shall make a report to the members of the company
(1) on the accounts examined by him,
(2) on balance sheet and p/l account which are laid before the
company in
general meeting and
(3) on every balance-sheet and profit and loss account and on
every other document declared by this Act to be pan of or
annexed to the balance-sheet or profit and loss account which
are laid before the company in general meeting during his
tenure of office,
• the report shall state whether, in his opinion and to the best
of his information and according to the explanations given to
him, the said accounts give the information required by this
Act in the manner so required and give a true and fair view (i)
in the case of the balance-sheet, of the state of the company's
affairs as at the end of its financial years; and (ii) in the case of
the profit and loss account, of the profit or loss for its financial
year.
•The auditor's report shall also state as per Sec.227(3)
(a) has obtained all the information and explanations
(b) proper books of account as required by law have been
kept by the company and proper returns adequate for the
purposes of his audit have been received from branches
not visited by him; etc.
• Statement as per CARO u/s 227 (4A)
FOR DETAILS CLICK HERE
Section228 Audit of accounts of branch office of company
audited by the
company's auditor
appointed under
section 224
by a person qualified
for appointment as
auditor of the
company under
section 226
If outside India- in
accordance with
the laws of that
country
Where the accounts of any branch office are audited by a person
other than the company's auditor the company's auditor(a) shall be entitled to visit the branch office, if he deems it
necessary to do so for the performance of has duties as auditor,
and
(b) shall have a right of access at all times to the books and
accounts and vouchers of the company maintained at the branch
office
Sec.224 (8) The remuneration of the auditors of a company—
(a) in the case of an auditor appointed by the Board or the
Central Government, may be fixed by the Board or the
Central Government, as the case may be; and
(aa) in the case of an auditor appointed under section 619 by
the Comptroller and Auditor-General of India, shall be
fixed by the company in general meeting or in such manner as
the company in general meeting may determine;
(b) subject to clause (a), shall be fixed by the company in
general meeting or in such manner as the company in general
meeting may determine.
For the purposes of this sub-section, any sums paid by the
company in respect of the auditors' expenses shall be deemed
to be included in the expression "remuneration".
Sec 229 of Companies Act, 1956 - Signature of audit
report etc.
The auditor’s report shall be signed only by the
� The auditor appointed by the company or
� If a firm Partner in the firm practicing in India.
Sec.231: Right of auditor to attend general meeting.—All
notices of, and other communications relating to, any general
meeting of a company which any member of the company is
entitled to have sent to him shall also be forwarded to the auditor of
the company; and the auditor shall be entitled to attend any general
meeting and to be heard at any general meeting which he attends
on any part of the business which concerns him as auditor.
AGAIN WITH THESE POWERS AND DUTIES
SIMULTANEOUSLY THERE IS PENALTY FOR NONCOMPLIANCE BY AUDITOR
Sec 233 of Companies Act, 1956 - Penalty for noncompliance by auditor with Sec 227 and 229
This Section provides that if any auditor�s report is made or
if any company document is signed or authenticated
otherwise than in conformity with Sec 227 (Powers and
Duties of Auditors) or Sec 229 (Signature of audit report),
then the auditor and the other person (other than the auditor)
who wilfully defaults by wrongly signing shall be punishable
with fine which may extend to ten thousand rupees (prior to
13.12.2000 the penalty was up to Rs.1000).
Section 224(1B)
what is the maximum exemption limit of the audit under
the regulation2 of the CA Act,1949.what is the difference
between the sec224(1b)and regulation 2 of the CA Act.?
As per guidelines for the members of ICAI no.1-ca(7)/02/2008
dt.8-8-2008,
PARA NO.
NATURE OF AUDIT
NO. OF AUDITS
TYPE OF COMPANY
6.1
TAX AUDIT
45
ALL
8.1
STATUTORY AUDIT
30 (20 PUBLIC LTD.
CO. AS PER
COMPANIES ACT)
BOTH PUBLIC AND
PVT. LTD.
REGULATION 2 IS APPLICABLE TO TAX AUDIT UNDER I.TAX
ACT,1961 i.e. maximum 30 audits per CA in a firm
Sec 224 (1B), for companies audit i.e. statutory audit, maximum
20 per CA in a firm
Section 227- Powers and duties of auditors
(1) Every auditor of a company shall have a right of access at all times to the
books and accounts and vouchers of the company, whether kept at the head
office of the company or elsewhere, and shall be entitled to require from the
officers of the company such information and explanations as the auditor may
think necessary for the performance of his duties as auditor.
(1A) without prejudice to the provisions of sub-section (1), the auditor shall
inquire (a) whether loans and advances made by the company on the basis of
security have been properly secured and whether the terms on which they
have been made are not prejudicial to the interest of the company or its
members;
(b) whether transactions of the company which are represented merely by
book entries are not prejudicial to the interests of the company;
(c) where the company is not an investment company within the meaning of
section 372 or a banking company, whether so much of the assets of the
company as consist of shares, debentures and other securities have been
sold at a price less than that at which they were purchased by the company;
(d) whether loans and advances made by the company have been shown as
deposits
(e) whether personal expenses have been charged to revenue account;
(f) Where it is stated in the books and papers of the company that any shares
have been allotted for cash, whether cash has actually been received in
respect of such allotment, and if no cash has actually been so received,
whether the position as stated in the account books and the balance-sheet is
correct, regular and not misleading.
(g) Whether the cess payable under section 441A has been paid and if not,
the details of amount of cess not so paid.
(2) The auditor shall make a report to the members of the company on the
accounts examined by him, and on every balance-sheet and profit and loss
account and on every other document declared by this Act to be pan of or
annexed to the balance-sheet or profit and loss account which are laid before
the company in general meeting during his tenure of office, and the report shall
state whether, in his opinion and to the best of his information and according to
the explanations given to him, the said accounts give the information required
by this Act in the manner so required and give a true and fair view �
(i) in the case of the balance-sheet, of the state of the company's affairs as at
the end of its financial years; and
(ii) in the case of the profit and loss account, of the profit or loss for its financial
year.
(3) The auditor's report shall also state �
(a) whether he has obtained all the information and explanations which to
the best of his knowledge and belief were necessary for the purposes of his
audit
(b) whether, in his opinion, proper books of account as required by law have
been kept by the company so far as appears from his examination of those
books, and proper returns adequate for the purposes of his audit have been
received from branches not visited by him;
(bb) whether the report on the accounts of any branch office audited
under section 228 by a person other than the company's auditor has
been awarded to him as enquired by clause (c) of sub-section (3) of that
section and how he has dealt with the same in preparing the auditor's
report;
(c) whether the company's balance-sheet and profit and loss account
dealt with by the report are in agreement with the books of account and
returns;
(d) Whether, in his opinion, the profit and loss account and balance-sheet
comply with the accounting standards referred to in sub-section (3C) of
section 211.
(e) in thick type or in italics the observations or comments of the
auditors which have any adverse effect on the functioning of the
company;
(f) Whether any director is disqualified from being appointed as director
under clause (g) of sub-section (1) of section 274.
(g) Whether the cess payable under Section 441A has been paid and if
not, the details of amount of cess not so paid
(4) Where any of the matters referred to in clauses (i) and (ii) of sub-section (2)
or in clauses (a), (b),(bb) (c) and (d) of sub-section (3) is answered in the
negative or with a qualification, the auditor's report shall state the reason for
the answer.
(4A) The Central Government may, by general or special order, direct that, in
the case of such class or description of companies as may be specified in the
order, the auditor's report shall also include a statement on such matters as
may
be
specified
therein:
Provided that before making any such order the Central Government may
consult the Institute of Chartered Accountants of India constituted under
the Chartered Accountants Act, 1949 (38 of 1949), in regard to the class or
description of companies and other ancillary matters proposed to be specified
therein unless the Government decides that such consultation is not necessary
or expedient in the circumstances of the case.
(5) The accounts of a company shall not be deemed as not having been, and
the auditors report shall not state that those accounts have not been properly
drawn up on the ground merely that the company had not disclosed certain
matters if(a) those matters are such as the company is not required to disclose by virtue
of any provisions contained in this or any other Act, and
(b) Those provisions are specified in the balance-sheet and profit and loss
account of the company.