There are certain statutory rights and duties of auditor which have been provided by the Companies Act, 2013. These provisions related to rights and duties of an auditor have been defined under Section 143 of the Companies Act, 2013. Although there is no direct mention of auditor’s powers in order to perform its duties, auditor must have certain powers without which it is not feasible for him to perform its duties.
Who is Auditor?
An independent professional who is authorized to examine and verify the validity of accounts and is certified to perform an audit is called an auditor. In other words, the person who ensures that the company complies with the terms of various provisions such as tax and others as required is called as auditor of the company. The main intention of auditor is to secure company from any deceit, fraud and to spot any disparity or shortcoming in accounting methods of the company. And give an opinion about the overall health of the financial position of the company.
Powers of an Auditor:
Powers vested under Companies Act, 2013:
Auditor has some special powers vested with him in respect to access financial records of the company. All these powers have been vested with him by Companies Act, 2013. According to the certain provisions of the Companies Act, 2013 auditor not only has access to the financial statements which are retained at the registered office of the company but to the records also kept in other branches or offices of the company. These financial records include account of book records and other vouchers of the holding company as well as of all subsidiary companies. Auditor has liberty to access the records at any time as per the rights granted to him as per companies act. Certain duties are mentioned as below:
Liberty to Access Company’s information:
As per the provisions under Section 143(1) of the Companies Act, 2013, certain powers have been granted to auditor in terms of information access. An auditor has leverage to retrieve financial records of the company that includes accounts, books and vouchers of the company. Financial books also include statutory, costing and statistical records of the company. He has authority to access and also to ask officers of the company about all financial information that is kept not only at registered or head office but also at branch offices too. The list includes following:
- Enquiry in respect of entries made in accounts: An auditor has the responsibility to check and enquire about the book entries and transactions tool place in company during entire financial year. The main intention behind this to audit financials of the company and check whether the entries were made on actual or not in order to secure the interest of the company.
- To examine loans and advances of the company: An auditor needs to check and examine all loans and advances made on behalf of company that whether they are duly secured and comply with the terms of the company. The auditor is required to verify the legal enforceability of security made by doing proper valuation of the securities so that it is not prejudicial to the interest of the company or its shareholders.
- To check and verify the investments and sales made by the company that includes company’s shares, securities, debentures etc. The main purpose behind is to verify whether the acquisition was made at a fair price or not. Further to check the personal expenses made by officers and directors of the company from company’s revenue account.
As per Section 145 of the companies act, 2013 only auditor is authorized to audit and sign the financials or audit report of the company that is required by any law or authority. Any comment, observation or mentioning about financial transaction in auditor’s report is to be duly read and discuss in the general meeting of the company and be open to any kind of inspection by its members.
As per Section 146 of the companies act, 2013, it is mandated for company to furnish every notice or communication in relation to any general meeting to an auditor. An auditor is required to attend the said general meeting either himself or through his representative who shall act as an auditor of the company on his behalf. That notice of a general meeting is required to be given at least 21 days before the said meeting either in writing or via electronic communication as per Section 101 of the companies act. That notice should mention date, place, day and timing of the meeting and shall also contain agenda or business statement need to be discussed in the meeting. In the said meeting auditor shall be given reasonable opportunity to speak about any concerns of the company.
The auditor is entitled to get a remuneration of his work on performance of his duties. Such remuneration of auditor can be fixed at general meeting of the company or in any such manner as may be determined. He is also entitled to receive any other remuneration or expenses as made or incurred by him during performance of his duties w.r.t the company.
Duties of Auditor of the Company
- An auditor is required to furnish an audit report of the company in every annual general meeting as per Section 143 (2) of the companies act, 2013
- In the said audit report, he is required to mention best suitable information about the accounts and financial condition of the company in order to give a true and clear picture of the company’s financial position. This report helps to predict balance sheet, cash flow and profit & loss of the company.
- As per Section 143(9) and (10) of the companies act, 2013 an auditor is required to comply with follow certain audit standards and addendums as prescribed by the central government, Institute of Chartered Accountants of India (ICAI), National Financial Reporting Authority (NFRA) and others.
- It is a prime responsibility of an auditor to provide information to central government about any fraud or misdoing of the company or by its officers as per Section 143(12) to 143 (15) & Rule 13 of the companies act, 2013. That report needs to be submitted within a period of 60 days to the central government.
- An auditor is required to attach a copy of its audit report with application at the time of filing of Voluntary Winding Up as per the provisions of Section 305 of the companies act, 2013.
Apart from above-mentioned powers and duties auditor has numerous other duties which also includes giving all possible support to officers during the investigation of company affairs which not only help the government to restrain about frauds and wrongdoing of company but also to maintain clarity in system.
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