One of the frequently asked questions these days is, should a company need to ratify the appointment of an auditor in the Annual General Meeting 2018. Should I explain my affirmative reply?
Posted in Chapter X - CA2013, Companies Act 2013
Tagged Appointment of Auditor, Auditor
The Companies Amendment Act, 2017 read with Notification S.O. 1833(E) dated 7th May 2018 amended law related to the audit committee. Certain transactions shall be voidable unless ratified by the audit committee. In this post, we will discuss updated law related to Audit committee.
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.
Posted in Chapter X - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility
Tagged Audit Committee, Auditor, Auditor Rotation, Companies Act 2013, Corporate Law, India, Ministry of corporate affairs, The Companies (Audit and Auditors) Rules 2014, the Companies (Audit and Auditors) Second Amendment Rules 2017
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.
Posted in Chapter I - CA2013, Chapter X - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility
Tagged Auditor, Removal of Difficulties, Rotation of Auditor, Section 139 of Companies Act 2013, The Companies (Audit and Auditors) Rules 2014, the Companies (Romoval of Difficulties) Third Order 2016
Yesterday late evening, I posted here about press release issued by Ministry of Corporate Affairs. Soon thereafter, two files uploaded on Official Gazette website with two notifications in each. In earlier post here today, we discussed establishment and jurisdiction of various NCLT benches.
In this post, we will have a bird’s eye view on Sections notified on 1st June 2016 related to NCLT.
Posted in Chapter I - CA2013, Chapter II - CA2013, Chapter IX - CA2013, Chapter VI - CA2013, Chapter VII – CA2013, Chapter XI - CA2013, Chapter XIV - CA2013, Chapter XV - CA2013, Chapter XXVII - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility
Tagged Accounts, Annual General Meeting, Annual Return, Articles, Auditor, Board of Directors, Boards’ Report, class-action suits, Debentures, deposits, Deposits Creditors and Charges, General Meeting, Incorporation, Incorporation & Registration, Inquiry, INQUIRY AND INVESTIGATION, Inspection, Investigation, Members and Shareholders, Memorandum, National Company Law Appellate Tribunal, National Company Law Tribunal, NCLAT, NCLT, Oppression and Mismanagement, Shares and Securities, Statutory Audit
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.
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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.
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Ministry of corporate Affairs issued a notification dated 14th December 2015 and published here in the Gazette of India dated 15th December 2015 regarding amendment in the Companies (Audit and Auditors) Rules, 2014.
No doubt the Companies Act, 2013 is not a law but collection of legal puzzle. Compliance of its provisions became hell. This is not just because of poor drafting of law but poor reading of law. We student of the Companies Act, 2013 need to unlearn the Companies Act, 1956 first and finally. We need to know, learn, understand and educate ourselves that the Companies Act, 1956 is now only for reference purpose only.
In last post, we discussed puzzle of ADT – 1 here but every coin have second side also. In that post we start reading form the charging sub – section and in this post we will start reading form the compliance required by the Ministry i.e. ADT – 1 itself.
No doubt the Companies Act, 2013 is not a law but collection of legal puzzle. Compliance of its provisions became hell. This is not just because of poor drafting of law but poor reading of law. We student of the Companies Act, 2013 need to unlearn the Companies Act, 1956 first and finally. We need to know, learn, understand and educate ourselves that the Companies Act, 1956 is now only for reference purpose only.
In this post we will try to solve puzzle of ADT – 1, Rule 4 and Section 139.
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:
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)]
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.
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]
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:-
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.
UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).
For every new law, legislative intent, which show it in debates taken place in Parliament, become important. These debates offer a guide while drafting subordinate legislation. There are many questions about future rules and regulations. I, here, compiled some important quotes from this debates from Rajya Sabha.[i][ii][iii]
Posted in Companies Act 2013, CorpGov, CSR, Governance and Responsibility, Truth of Our Time
Tagged Auditor, Chartered Accountants, class-action suits, Companies Act 2013, Companies Bill 2012, CorpLaw, Corporate Law, Corporate Social Responsibility, CSR, Director, Ganguly Committee, Independent Director, India, Legal Reforms, Ministry of corporate affairs, Rajya Sabha, Reforms
(UPDATE: on 30th August 2013: Companies Bill became the Companies Act, 2013 (Act 18 of 2013).
In this series of my blog post related to Companies Bill, 2012; I am writing this post about provision relating to internal and cost audits. The manner of appointment of auditors may affect independence of cost audit and good corporate governance. The bill addresses this issue very well.
Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility
Tagged Accounts, Accounts and Audit, Appointment of Auditor, Auditor, Auditor Remuneration, Causal Vacancy, Companies Bill 2012, CorpGov, CorpLaw, Corporate Governance, Corporate Law, Cost Audit, Disqualification of Auditor, India, Internal Audit, Legal Reforms, Ministry of corporate affairs, Profession, Reforms, Removal of auditor, Resignation of Auditor
(UPDATE: on 30th August 2013: Companies Bill, 2012became the Companies Act, 2013 (Act 18 of 2013). )
In my last blog post auditor under companies Act, 2013: from appointment to removal, I discussed auditor his appointment, remuneration resignation and removal along with other incidental matters. In this post I will discuss power, duties and penalties related to auditors and audit report.
Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility
Tagged Accounting, Accounting Standard, Accounts and Audit, Audit, Audit Report, Auditor, Branch Audit, CA, Chartered Accountant, Companies Act 2013, Companies Bill 2012, Comptroller and Audit General of India, CorpGov, CorpLaw, Corporate Governance, Corporate Law, General Meeting, Government Companies, ICAI, India, Institute of Chartered Accountants of India, Legal Reforms, Ministry of corporate affairs, Profession, Reforms, Statutory Audit
(UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).
Corporate Governance is a fundamental structure of all recent companies’ laws globally. True and fair Audits are core concern for corporate world and its regulators. While I was writing my earlier blog post “Footsteps of Corporate Governance in Companies Bill 2012 Companies Act, 2013”, I noticed that the Companies Bill, 2012 Act, 2013 has special concern for quality of audits. In my post “National Financial Reporting Authority” you may feel the depth of concern of our law makers about audits, which have already been forced accounting and auditing regulator, the Institute of Chartered Accountants of India, for introspection.
In this series of my blog post related to Companies Bill, 2012 Act, 2013; I am writing about provision relating to auditors. The manner of appointment of auditors may affect independence of audit. The bill Act addresses this issue very well.
Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility
Tagged Accounts, Accounts and Audit, Auditor, Causal Vacancy, Chartered Accountant, Companies Bill 2012, CorpGov, CorpLaw, Corporate Governance, Disqualification of Auditor, First Auditor, ICAI, India, Institute of Chartered Accountants of India, Profession, Reforms, Removal of auditor, Resignation of Auditor, Statutory Audit
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