Category Archives: Chapter X – CA2013

AUDIT AND AUDITORS

COST AUDIT after Amendment Rules 2014


We have discussed applicability of the Companies (Cost Record and Audit) Rules 2014 as amended by the Companies (Cost Record and Audit) Amendment Rules 2014. Certain companies shall maintain cost record as discussed earlier here. Earlier we have discussed Cost Audit under original Rules before these amendment here.

Applicability of Cost Audit [Rule 4]:

Ever company specified in ITEM (A) of Rule 3, shall get its cost record audited if –

the overall turnover of the company from its products and services during preceding financial year is rupees fifty crore or more, or

the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintained under [item (a) of] Rule 3 is rupees twenty five crore or more. [Rule 4(1)]

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COST RECORD after Amendment Rules 2014


The Companies (Cost Record and Audit) Rules 2014 as amended by the Companies (Cost Record and Audit) Amendment Rules 2014 shall be applicable from the date of its publication in official gazette of India and published in official gazette. I am yet to find notification in official gazettee untill 20th January 2015. Earlier we have discussed Cost Record under original Rules before these amendment here.

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Amendment in Section 143(5)


Section 143(5) of the Companies Act 2013, as discussed earlier here originally read as under:

In the case of a Government company, the Comptroller and Auditor-General of India shall appoint the auditor under sub-section (5) or sub-section (7) of section 139 and direct such auditor the manner in which the accounts of the Government company are required to be audited and thereupon the auditor so appointed shall submit a copy of the audit report to the Comptroller and Auditor-General of India which, among other things, include the directions, if any, issued by the Comptroller and Auditor-General of India, the action taken thereon and its impact on the accounts and financial statement of the company.

On 4th September 2014 Ministry of Corporate Affairs came out with the Companies (Removal of Difficulties) Seventh Order, 2014. Which come it force from date of its publication which is 4th September 2014. According to this order, Section 143(5) now read as under:

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COST AUDIT


We have discussed applicability of the Companies (Cost Record and Audit) Rules 2014. Certain companies shall maintain cost record as discussed earlier here.

According to Rule 4 of the Companies (Cost Record and Audit) Rules 2014, cost audit shall be applicable –

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APPLICABILITY OF COST AUDIT RULES


The Companies (Cost Record and Audit) Rules 2014 shall be applicable from the date of its publication in official gazette of India and published in official gazette on 1st July 2014 (Notificiation is dated as 30th June 2014).

Applicability of Cost Record [Rule 3]:

For the purpose of sub-section (1) of section 148 of the Act, the following class of companies, including Foreign Companies defined in sub-section (42) of section 2 of the Act, shall be required to include cost records in their books of account, namely:-

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DUTIES AND POWERS OF AUDITORS


We have discussed provisions under the Companies Act 2013 related to audit report, duties, power and penalties earlier here.

Auditor’s Report:

The auditor shall make a report to the members of the company on accounts examined by him on every financial statements and report financial statement give a true and fair view of the state of the company’s affairs at the end of its financial year and profit or loss and cash flow for the year and such other matters. [Section 143(2)]

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LIABILITY AND DISQUALIFICATION OF AUDITOR


According to Section 147(2) of the Companies Act 2013 discussed earlier here, if an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees. If an auditor has contravened such provisions knowingly or willfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees.

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REMOVAL AND RESIGNATION OF AUDITOR


In this post we will discuss resignation and removal of auditor of a company.

REMOVAL:

The auditor may be removed from his office before expiry of his term only by special resolution after approval from central government. The auditor concern shall be given opportunity of being heard. [Section 140(1) of the Companies Act 2013 discussed earlier here]

The application to the Central Government for removal of auditor shall be made in Form ADT – 2 and shall be accompanied with fees as provided for this purpose under the Companies (Registration Offices and Fees) Rules, 2014. [Rule 7(1) of the Companies (Audit and Auditors) Rules 2014]

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AUDIT ROTATION


Sub – section (2) of this section 139 of the Companies Act, 2013 discussed earlier here expressly say that provide that no listed company or some other companies as notified shall appoint or re – appoint (i) an individual for more than one term of five consecutive years, or (ii) an audit firm for more than two terms of five consecutive years. Any audit firm shall not be appointed as auditor which has any common partner or partners with the firm whose tenure has expired in the company immediately preceding financial year.

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:-

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APPOINTMENT OF AUDITOR


True and fair Audits are core concern for corporate world and its regulators.  The manner of appointment of auditors may affect independence of audit. Section 139 of the Companies Act 2013 discussed earlier here, discuss appointment of auditor in detail.

The Companies (Audit and Auditors) Rules 2014 further prescribes tasteless syrup with bitter pills recommended under Chapter X of the Companies Act 2013.

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