Appointment of Statutory Auditor
- The Board of directors is required to appoint the first auditor within 30 days of registration of company and in case of failure to do so, the members shall appoint the first auditors within 90 days at the EGM, however, such auditors have to vacate the position on conclusion of first AGM.
- Every auditor (except first auditor) including LLP, shall be automatically appointed for a tenure of five years with/ without re-appointment in the subsequent AGMs.
- Auditor’s consent and certificate need to be obtained by the company explaining that such appointment is in compliance with the provisions of the Act and satisfies the criteria provided in section 141.
- Intimation (or notice) of appointment, now, need to be filed by the company with the Registrar within fifteen days of appointment.
As a step in the direction of corporate governance, the following provisions have been introduced in the Companies Act:
Section 134 provides that a report by the Board of Directors containing details on the matters specified including directors’ responsibility statement shall be attached to every financial statement laid before a company. The responsibility statement includes that the applicable Accounting Standards have been followed in preparing the financial statements and reporting the material departures therefrom, that the companies follow their accounting policies consistently, the accounts have been prepared on a going concern basis and compliance of all applicable laws.
Section 177 provides the requirements and manner of constituting the Audit Committee. The Audit Committee shall consist of minimum three directors with Independent Directors forming a majority and majority members must have ability to read and understand financial statements. The Section also provides for a vigil mechanism in every listed and prescribed class of companies and such mechanism shall be disclosed at the website of the company and should be mentioned in Board’s report.
Section 184 provides the manner and periodicity in which the every director shall made disclosure of his concerns or interest in any company, body corporate, firms and parties to the contract. He concerned director should not participate in the meeting taking the decision in such cases. The contract or agreement entered in to by the company without disclosure shall be voidable at the option of the company.
The 2013 Act requires prescribed class of companies to have at least one woman director on the board. In accordance with the Act, existing companies meeting the prescribed criteria need to comply with the requirement within one-year i.e. March 31, 2015.
Risk management committee
As per the revised clause 49, the company through its Board of Directors shall constitute a Risk Management Committee. The Board shall define the roles and responsibilities of the Risk Management Committee and may delegate monitoring and reviewing of the risk management plan to the committee and such other functions as it may deem fit.
He majority of Committee shall consist of members of the Board of Directors. Senior executives of the company may be members of the said Committee but the Chairman of the Committee shall be a member of the Board of Directors.
The Companies Act 2013, requires its Board of Directors to develop and implement a risk management policy and identify risks which may threaten the existence of the Company. It however does not require constitution of a separate risk management committee as required by revised clause 49.
However, SEBI has exempted the applicability of Clause 49 (of the Listing Agreement) for Companies having paid up equity share capital not exceeding Rs. 10 crore and Net Worth not exceeding Rs. 25 crore, as on the last day of the previous financial year.
BROADLY, AUDIT INVOLVES THE FOLLOWING
- Indepth study of existing systems, procedures and controls for proper understanding. Suggestions for improvement and strengthening.
- Ensuring compliance with policies, procedures and statutes.
- Comprehensive review to ensure that the accounts are prepared in accordance with Generally Accepted Accounting Policies and applicable Accounting Standards/IFRS.
- Checking the genuineness of the expenses booked in accounts.
- Reporting inefficiencies at any operational level.
- Detection and prevention of leakages of income and suggesting corrective measures to prevent recurrence.
- Certification of the books of account being in agreement with the Balance Sheet and Profit and Loss Account.
- Issue of Audit Reports under various laws.
TYPES OF AUDITS CONDUCTED
- Statutory Audit of Companies
- Tax Audit under Section 44AB of the Income Tax Act, 1961.
- Audit under other sections of the Income Tax Act, 1961 such as 80HHC, 80-IA, etc.
- Concurrent Audits.
- Revenue Audit of Banks.
- Branch Audits of Banks.
- Audit of PF Trusts, Charitable Trusts, Schools, etc.
- Audit of Co-operative Socities.
- Information System Audit
- Internal Audits