Qualifications and Disqualifications of a Company Auditor
Audits can be classified into two groups namely: Optional Audit and Compulsory Audits. The audit which is not legally required is called optional audit which is otherwise known as private audit. The audit which is legally required is called compulsory audit which is otherwise known as statutory audit.
In case of optional audits rights, duties, liabilities, etc of auditor will be of Contractual nature. That means all those things will be determined by agreement which has got formed between auditor and client. But in case of Compulsory audits rights, duties, etc of auditor will be of Statutory nature, that means concerned act itself determines rights, duties etc of auditor. Audit of Joint Stock Companies comes under Statutory Audits.
Important Sections of Auditors; The Companies Act, 1956
Section 224: Appointment and remuneration of auditors.
Section 224A: Auditor not to be appointed except with the approval of the company by special resolution in certain cases.
Section 225: Provisions as to resolutions for appointing or removing auditors.
Section 226: Qualifications and Disqualifications of the Auditor.
Section 227: Powers and Duties of Auditors.
Section 228: Audit of accounts of branch office of the company.
Section 229: Signature of Audit Report.
Section 230: Reading and inspection of auditor's report.
Section 231: Right of auditor to attend general meeting.
Section 232: Penalty for non compliance with Section 225 to Section 231.
Section 233: Penalty for non compliance by auditor with Section 227 to Section 229.
Section 233A: Power of Central Government to direct special audit in certain cases.
Section 233B: Audit of Cost Accounts in certain cases.
Qualifications of Company Auditor
According to Sec. 226 of Companies Act, Company auditor should be either Chartered Accountant or Certified Auditor.
Chartered Accountant: The members of `Institute of Chartered Accountant of India` are called Chartered Accountants. Their profession is regulated by Chartered Accountants Act 1949. A firm of Chartered Accountants may also conduct company audit. But every partner of such firm must be a Chartered Accountant.
Certified Auditor: The persons who are the holders of certificates issued by Central Government under Certified Auditors Rules are called Certified Auditors. They can also carry on auditing profession at anywhere in India. They are also eligible to conduct Company Audit.
Disqualifications of Company Auditor
Section 226(3) of Companies Act reads about disqualifications of company auditor. The following persons are disqualified;
- Body corporate
- Officer or employee of the company
- Partner or employee of an office or employee of the company.
- Insolvent person
- Lunatic person
- A person who is indebted to the company for a sum exceeding Rs. 1000/-
- A person who has given guarantee for such sum relating to the company.
- If a person is disqualified to holiday company, automatically he gets disqualified to its subsidiaries also. In the same way if a person is disqualified to subsidiary company, he gets disqualified to related holding company also.
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Right and duties of company auditor are of statutory nature. The companies Act of 1956 has clearly explained the rights and duties of company auditor.