Effect of non – ratification of the appointment of the auditor was one of the wonders of the Companies Act, 2013. There were so many queries regarding effects of non – ratification of auditor and removal of an auditor. Now, all these long discussions came to end. The Companies Amendment Act, 2017 read with Notification S.O. 1833(E) dated 7th May 2018 deletes provision of annual ratification of the appointment of auditor.
Category Archives: Chapter X – CA2013
Recently, after the Companies (Audit and Auditor) (2nd) Amendment Rules, 2018 some section of media reported that an audit firm shall be criminally liable under the company law for a fraudulent act of an audit partner, while few others have view that there is some new position of law regarding criminal liability of audit firms. Both of these are slightly wrong interpretations.
Finally government tries to come out of Sahara Blues. Government earlier was in pressure to put corporate governance in place among private companies and tried well. Thereafter, industry lobby (read as vested interests among “promoters” and “professionals”) started pleaded mercy for all “otherwise honest players”.
Government initiated it journey with exemption notifications and now bring this amendment rules.
The Companies (Audit and Auditors) Second Amendment Rules, 2017 is interesting in more than one way. Statistically, this exemption will benefit only selected big players among private companies in India and their auditors.
Section 139(2) of the Companies Act, 2013 reads, “No listed company or a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appoint—
(a) an individual as auditor for more than one term of five consecutive years; and
(b) an audit firm as auditor for more than two terms of five consecutive years.”
Rule 5 of the Companies (Audit and Auditors) Rules 2014 before present amendments reads, “for the purposes of sub-section (2) of section 139, the class of companies shall mean the following classes of companies excluding one person companies and small companies:-
(a) all unlisted public companies having paid up share capital of rupees ten crore or more;
(b) all private limited companies having paid up share capital of rupees twenty crore or more;
(c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.”
Now, the Companies (Audit and Auditors) Second Amendment Rules, 2017, amend clause (b) of rule 5. The amendment rules reads, “in the Companies (Audit and Auditors) Rules, 2014, in rule 5, in clause (b), for the word “twenty”, the word “fifty” shall be substituted.
This amendment rules increase threshold limit for rotation of auditors for private companies by a good 150%.
As number of companies and auditors is not much, it may not affect stakeholders significantly but our commitment towards corporate governance.
Ministry of corporate affairs inserted a clause (d) in rule 11 of the Companies (Audit and Auditors) Rules, 2014. The Companies (Audit and Auditors) Amendment Rules, 2017 was published in official gazette on 30th March 2017 and came into force from that date.
Government of India has removed a dozen difficulties from the Companies Act, 2013. Yes, the Companies (Removal of Difficulties) Third Order, 2016 is twelfth order in Removal of difficulties series of Orders in these three years.
In this post we will discuss this Removal of Difficulties Order.
The Companies (Auditor’s Report) Order, 2016 is notified on 29th March 2016 in supersession of the Companies (Auditor’s Report) Order, 2015 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 990 (E), dated the 10th April, 2015, except as respects things done or omitted to be done before such supersession.
In an order dated 17th February 2016 Whole Time Member of Securities and Exchange Board of India, debars an auditor (Chartered Accountant is this case) from issuing any certificate. SEBI held that the Auditors had aided and abetted the Company in committing the alleged fraud.