Rights and Duties of Company Auditors
Auditing & AssuranceAuditing Notes BCOM
Introduction
In this article,
we are going to discuss about Rights and Duties of Company Auditors asked in 2013,
2015, 2016 exam.
Rights and Powers of Company Auditors [Sec. 143]
A company
auditor has the following rights:
1. Right of Access Books of Accounts:
As per Section
143(1) of the Companies Act every auditor of the company has the right to
access at all times to the books of accounts and vouchers of the company,
whether kept at the head office of the company or elsewhere. According to Sec.
148, A company auditor has the right to examine the cost records also which are
required to be maintained by certain companies relating to production sales,
stores etc.
2. Right to Obtain Information and Explanations:
An auditor can
call for any information or explanation from different officers of the company
which he may think necessary for the performance of his duties.
Apart from the
auditor’s right to obtain information and explanation it is the duty of every
officer of the company to furnish without delay the information to the company
auditor. If the directors or officers of the company refuse to supply some
information on the ground that in their opinion it is not necessary to furnish
it, then the auditor has the right to mention that in his audit report.
3. Right to Receive Notices and Other Communication
Relating to General Meetings and to attend them:
According to
section 146 of the companies act an auditor of a company has the right to
receive notices and other communications relating to the general meetings in
the same way as that of the members of the company.
Similarly an
auditor also has the right to attend any annual general meeting and also to be
heard at those meetings which he attends and which concerns him as an auditor.
The auditor also
has the right to make a statement or explanation with regard to the accounts he
has audited. But he auditor is not expected to answer questions in the general
meeting.
4. Right to Visit Branches:
According to
section 143(8) of the companies act the auditor of the company has the right to
visit the branch office or offices of the company. He can also audit such
accounts of eh offices of the company provided that there is not qualified
auditor to audit the accounts of the branch office or offices of the company,
in such cases, the auditor has the right to access at all times to the books of
accounts and vouchers that the company maintains at branch office or offices.
5. Right of Lien:
Auditor can
exercise lien on books and documents placed at his possession by the client for
non-payment of fees, for work done on the books and documents. [Sec. 128]
6. Right to Correct Any Wrong Statement:
The company
auditor is required to make a report to the members of the company on the
accounts examined by him of the final accounts and the related documents which
are laid down before the company in the general meeting.
7. Right to sign the Audit Report:
As per section
145 of the companies act only the person appointed as auditor of the company or
where a firm is so appointed, only a partner in the firm practicing in India,
may sign the audit report or authenticate any other document of the company
required by law to be signed.
8. Right to Being Indemnified:
An auditor is
considered to be an officer of the company and he has the right to be
indemnified out of the assets of the company against any liability incurred by
him in defending himself against any civil and criminal proceedings by the
company if it is proved that the auditor has acted honestly or the judgment is
delivered in his favour.
9. Right to seek Legal and Technical Advice:
The company
auditor has the full right to seek the opinion of the experts and to take their
legal and technical advice so as to discharge his duties efficiently.
10. Right to Receive Remuneration:
As per Section
142 of the Companies Act, the company auditor has the right to receive
remuneration provided he has completed the work which he has undertaken to do
so.
Duties of Company Auditors
According to
Sec. 143 of the Companies Act, 2013, the duties of auditors are classified
under the following headings:
1. Duty to Enquire:
It is the duty
of auditor to inquire into the following matters:
- 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 prejudicial to
the interests of the company or its members.
- Whether transactions
of the company which are represented merely by book entries are prejudicial to
the interests of the company.
- Whether loans
and advances made by the company have been shown as deposits.
- Whether
personal expenses have been charged to revenue accounts.
- Whether or not
cash has actually been received from allotment of shares.
- Where the
company not being an investment company or a banking company, whether so such
of the assets of the company as consist of shares, debentures and other
securities have been sold at a price less than at which they were purchased by
the company.
2. Duty to make report:
The auditor
shall make a report to the members of the company. In his report, the auditor
shall report on:
- Whether he has
sought and obtained all the information and explanations which to the best of
his knowledge and belief necessary for the purpose of his audit and if not, the
details thereof and the effect of such information on financial statements.
- Whether in his
opinion, proper books of account are required by law have been kept by the
company so far as appears from his examination.
- Whether the
company’s balance sheet and profit and loss account dealt with in the report
are in agreement with the books of accounts and returns.
- Whether in his
opinion, the financial statements comply with the accounting standards.
- Whether any
director is disqualified from being appointed as a director.
- Whether the
company has adequate internal financial control system in place and the
operating effectiveness of such control.
3. Such other matters as may be prescribed under rule
11:
The auditor’s
report shall also include views and comments on the following matters.
- Whether the
company has disclosed the impact, if any, of pending litigations on its
financial position in its financial statement.
- Whether the
company has made provisions, as required under any law or accounting standards,
for material losses, if any on long term contracts including derivative
contracts.
- Whether there
has been any delay in transferring amounts, required to be transferred, to the
investor education and protection fund by the company.
4. Duty to report on frauds u/s 143 and rules 13:
If an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offense involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the central government within such time and in such manner prescribed in rule 13.
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