AUDIT UNDER COMPANIES ACT, 2013 PPT(1).pptx

An audit is an independent form of examining any company’s financial position irrespective of its size and legal structure. The Audit is conducted to express an opinion thereon, which helps report and determine an accurate and fair view of a company’s financial position and operating result.

1. AUDIT UNDER COMPANIES ACT, 2013

2. MEANING OF AUDIT An audit is an independent form of examining any company’s financial position irrespective of its size and legal structure. The Audit is conducted to express an opinion thereon, which helps report and determine an accurate and fair view of a company’s financial position and operating result . The Companies Act 2013 has made the audit of accounts of companies’ compulsory. Section 139 to 148 provide for the qualifications, disqualifications, appointment, removal, rights, duties & liabilities of company auditors. Some of the Key summary of the Provisions in this regard is given below:

3. As required for Audit under Companies Act, 2013, every company shall prepare a financial statement ending 31st March every year. Such financial statements must be given an accurate and fair view of the company’s financial affairs and comply with the accounting norms notified by the central government under Section 133 of the Companies Act. The company’s financial statement must also be prepared in the form and format that may be laid down for a specific type of company. The expression financial statement required for Audit under Companies Act, 2013 shall include- Profit & loss account, or in the case of Non-profit organization, and income & expenditure account Balance sheet Cash flow statement A statement for changes in shares, if applicable. & An explanatory note attached to, or constituting part of, any document referred

4. APPOINTMENT OF FIRST AUDITOR First auditor of the company, other than a Government company, shall be appointed by the Board of Directors within 30 days from the date of Incorporation of the company and if the board fails to do so, then Shareholders of the company within 90 days at an extraordinary general meeting shall appoint the first auditor. In case of Government company, the first auditor shall be appointed by CAG within 60 days from the date of Incorporation and If CAG fails to appoint, by the Board of Directors of the company within the next 30 days. Upon failure of the Board of Directors the shareholders of the company shall appoint the first auditor within 60 days at an extraordinary general meeting. Tenure of appointment the first auditor in both the above cases is till the conclusion of the first AGM.

5. Appointment of Subsequent Auditor: At the 1st AGM, company shall appoint an individual or a firm as an auditor who shall hold office from the conclusion of that AGM till the conclusion of 6th AGM of the Company. In the case of Government company, CAG, appoint an auditor duly qualified to be appointed as an auditor of the company within a period of 180 days from the commencement of the financial year who shall hold the office till the conclusion of the AGM.

6. Persons Not Eligible For An Audit Under Companies Act, 2013 Below mentioned individual shall be ineligible for appointment as an auditor of a company – A body corporate other than an LLP registered under the Limited Liability Partnership Act, 2008. An employee or officer from the company. A person who is a partner or employed of an employee or director of the company. A person who is a family member or friend.

7. ROTATION OF AUDITORS Section 139 read with Rule 5 of the Companies (Audit and Auditors) Rules, 2014 deals with Rotation of Auditors and accordingly following company or a company belonging to such class or classes of companies shall not appoint or re-appoint (a) an individual as auditor for more than one term of 5 Consecutive years; and (b) an audit firm as auditor for more than two terms of 5 consecutive years: All Listed Companies All Unlisted Public Companies having paid-up share capital of Rs.100 crore or more; All private limited company having paid-up share capital of Rs.50 crore or more; 4. All companies having paid-up share capital of below threshold limit as mentioned in (2) & (3) above, but having public borrowings from banks, financial institutions or public deposits of Rs.50 crore or more. The above provisions of “Auditors Rotation” is not applicable for following: One Person Company(OPC); Small Company; Specified IFSC Public Company; Specified IFSC Private Company;

8. TYPES OF AUDIT STATUTORY AUDIT A statutory audit is an external audit of a company’s financial statements, conducted by a qualified auditor. The purpose of a statutory audit is to provide assurance to to the stakeholders of a company that its financial statements are accurate and reliable . Every company is required to appoint a statutory auditor to audit its financial statements . A company is required to appoint a qualified auditor as its statutory auditor. The auditor must be independent, and not have any direct or indirect financial interest in the company. The appointment of the auditor must be approved by the shareholders of the company.

9. INTERNAL AUDIT Internal audit is a process by which a company’s internal controls, accounting procedures, and financial statements are reviewed by an independent auditor. The purpose of internal audit is to identify and evaluate the company’s internal control systems and make recommendations for improvements. Every company that meets the threshold limit of paid-up share capital of Rs . 50 crore or more, or turnover of Rs . 250 crore or more, is required to have an internal audit system. company can either appoint an independent internal auditor or set up an internal audit department. The internal auditor or department must be independent of the company’s management and must report directly to the audit committee.

10. 3. COST AUDIT Cost audit is a process by which a company’s cost accounting records and cost statements are audited by a qualified cost accountant. The purpose of cost audit is to ensure that the company’s cost accounting records and statements are accurate and in compliance with the Cost Accounting Standards (CAS) issued by the Institute of Cost Accountants of India (ICAI ). In respect of companies in the Regulated sectors as contained in Table A of Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 shall get its cost records audited if the Overall annual turnover of the company from all its products and services during the immediately preceding financial year is 50 crore or more  and Aggregate turnover of the individual products or service for which cost records are required to be maintained under Rule 3 is 25 crore or more.

11. In respect of companies in the Non-regulated sector as contained in Table B of Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 shall get its cost records audited if the Overall annual turnover of the company from all its products and services during the immediately preceding financial year is 100 crore or more and Aggregate turnover of the individual products or service or services for which cost records are required to be maintained under Rule 3 is 35 crore or more. A company is required to appoint a qualified cost accountant as its cost auditor. The cost auditor must be independent, and not have any direct or indirect financial interest in the company. The appointment of the cost auditor must be approved by the shareholders of the company.

12. 4. SECRETARIAL AUDIT Secretarial audit is a process by which a company’s compliance with various laws and regulations is reviewed by a qualified company secretary. The purpose of secretarial audit is to ensure that the company is complying with all the applicable laws and regulations . Every company that meets the threshold limit of paid-up share capital of Rs . 50 crore or more, or turnover of Rs . 250 crore or more, is required to conduct a secretarial audit. A company is required to appoint a qualified company secretary as its secretarial auditor. The secretarial auditor must be independent, and not have any direct or indirect financial interest in the company. The appointment of the secretarial auditor must be approved by the shareholders of the company . 5. FORENSIC AUDIT A forensic audit is an analysis and review of the financial records of a company or person to extract facts, which can be used in a court of law. Forensic auditing is a specialty in the accounting industry, and most major accounting firms have a department forensic auditing.