Tag Archives: The Companies (Audit and Auditors) Rules 2014

Ratification of Auditor –Bye Bye

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.

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Criminal Liability in case of Audit Firm

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.

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Out of Sahara Blues

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.


Specified Banks Notes – Amendment in Companies Law

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.

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Removal of Auditor Appointment Difficulty

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.

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That Audit Report

Indian corporate world was shocked and corporate governance became a question when on 20th October 2014, M/s. R. H. Modi  & Co., Chartered

Public Notice by Auditors

Public Notice by Auditors

Accountants, auditor of C. Mahendra Exports Limited published a public notice in newspaper. It was alleged that the company “in a complete illegal and malafide manner filed, uploaded and circulated the Annual Report with the financial results of the company for financial year 2014 – 15 and the auditor report dated 7th September 2015 purported that the financial statements have been audited and Auditors Report signed by us (M/s. R. H. Modi  & Co., Chartered Accountants).

The auditor in this public notice claimed that these financial statements have not been finalised and audited by them. The auditor claimed that despite their strong objection to the passing of company’s account in their present form, the same have been passed by the shareholders of the company in annual general meeting held on 26th September 2015.

The company filed its clarification before stock exchanges, which is available in site of Bombay Stock Exchange here and site of National Stock Exchange here. The company not only stated facts from their side but also raised several questions on point of law.

According to facts mentioned by the company, Managing Director and Statutory Auditors did not sign the financial statements and Auditors Report. The company presented following interesting queries:

  1. Can the auditor refuse to sign the auditor’s report due to dispute between the promoters?
  2. Can the Auditor not sign the Audit Report if the MD does not sign the accounts?

Fully clarification written by the company is worth academic reading.

This blog does not want to discuss on the matter which may soon go to inquiry by relevant professional bodies and regulators. However, development on this matter may be of academic interests.

Reply by Company P.1

Reply by Company P.1

Reply by Company P.2

Reply by Company P.2

Reply by Company P.3

Reply by Company P.3


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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