Any individual trained to review and verify accounting data and recognised as a Chartered Accountant (CA) under the Chartered Accountant Act, 1949 is deemed to be an auditor. Every company needs to appoint an auditor as per the provisions of the Companies Act, 2013. Every business established under the 2013 Companies Act is required to compile books of accounts, financial statements, and papers for each fiscal year, and these books must be audited by a statutory auditor designated by the company for this particular purpose. The appointment of such auditors is controlled by the 2013 Companies Act (Section 139), as amended by the 2014 Companies (Audit and Auditors) Rules
Who’s a Statutory Auditor?
In our country the term “statutory auditor” talks about an external auditor. A “statutory audit” is basically a legally mandated evaluation of the quality of a government’s or company’s accounting information. The goal of a statutory audit is the same as any other purpose of audit – to determine if a business provides a thorough and truthful depiction of its financial situation by evaluating details such as accounting reports, financial statements, and bank accounts.
A statutory auditor is generally an official and approved service provider who certifies financial statements in accordance with appropriate professional auditing standards like INSTOSAI, ACCA, and ACA. A statutory auditor must be recognised as a CA (Chartered Accountant) as per the 1949 Chartered Accountant Act. According to the regulations of the 2013 Companies Act, every firm must appoint a statutory auditor to evaluate and verify accounting information.
Purpose for Appointment of Auditor
The purpose of the auditors in the company is to protect the interests of the shareholders. The auditor is obligated by law to examine the accounts maintained by the directors and inform them of the true financial position of the company. Auditor gives his independent opinion to the owners or shareholders of the company to protect and keep the company in a safe financial condition.
Statutory Auditor: Appointment
The first auditor of the company must be chosen by the board of directors within 30 days of the company incorporation or registration, according to Section 139 of the Companies Act, 2013.
If the auditor is not appointed, the board of directors must notify the shareholders, who must then call an extraordinary general meeting within 90 days of receiving the notification from the board and select the first auditor. The auditor in question shall serve until the end of the first annual general meeting. A future auditor will be selected by the shareholders at the first annual general meeting and will serve for a period of five years.
Within 15 days following the appointment, the firm must additionally file a notice of such appointment in Application Form ADT-1 with the Registrar.
Statutory Auditor Appointment: In Case of a Government Company
In the case of a government company, the first auditor must be appointed by the Controller and Auditor General of India within sixty days of the firm’s establishment or registration.
In the event that the auditor is not appointed, the board of directors must appoint the first auditor within the following 30 days. If the board fails to nominate within 30 days, they must notify shareholders, who must then convene an extraordinary general meeting within 60 days after receiving notification from the board to select the first auditor.
The auditor in question shall serve until the end of the first annual general meeting. The Controller and Auditor General of India will appoint a subsequent auditor within 180 days of the start of the fiscal year till the end of the annual general meeting.
Statutory Auditor Appointment: In the Case of Casual Vacancy
A casual vacancy may develop as a result of:
- The Auditor Has Died
- Auditor’s Disqualification
- Auditor’s Resignation
Casual vacancies must be filled by the Board of Directors within thirty days, and if the vacancy is based on resignation, it must be replaced by the Board of Directors and authorised by shareholders within three months.
FAQs
Appointment of an Auditor for Different Kinds of Companies?
| Particulars | Non-Government Company | Listed/Specified Company | Government Company |
| Application for 1st Auditor post Incorporation | Appointed by the Board Of Directors. This has to be done within 30 days from the date of Registration. Appointment can also be done by Members at Extraordinary General Meeting within 90 days of information. | Appointed by Board Of Directors. This has to be done within 30 days from the date of Registration. Appointment can also be done by Members at Extraordinary General Meeting within 90 days of the information. | Appointed by the Comptroller and Auditor General of India. This has to be done within 60 days from the date of Registration. Appointment can also be done by Board Of Directors within 30 days of incorporation. Members can also appoint at an Extraordinary General Meeting within 60 days of Information. |
| Auditor at First AGM with the written consent and a certificate of Auditor. | The appointment is done by the members He will hold office till the end of the 6th Annual General Meeting (AGM). The appointment shall be in accordance with the conditions laid down by the auditor. | The appointment is done by the members for a maximum term of 5/10 consecutive years. Cooling off period of 5 years before next appointment will be there. | The appointment is done by the Comptroller and Auditor General of India. He should be appointed within 180 days from the 1st of April. |
| Appointment of Subsequent Auditor | The appointment is done by the members and he will hold office till the conclusion of the 6th meeting. | The appointment is done by the members for a Maximum term of 5/10 consecutive years. | The appointment is done by the Comptroller and Auditor General of India within 180 days from the 1st of April. |
| Casual Vacancy due to resignation and other reasons | The appointment is by the members within 3 months of the recommendations of Board and he will hold office till the next AGM. | The appointment is by the members within 3 months of the recommendations of Board and he will hold office till the next AGM. | The appointment is done by the Comptroller and Auditor General within 30 days. |
Statutory Auditor: Duties and Responsibilities?
A statutory auditor’s role should ideally encompass the following functions:
- Make Inquiries
Well, one of the most important tasks of the auditor is to ask questions when he or she sees fit. A branch auditor is in charge of all tasks and obligations at the branch level, as well as submitting the audit report to the company’s auditor for evaluation.
- Provide an Audit Report
The purpose of hiring an external auditor is to perform an unbiased audit. This is independent of any internal ties inside the organisation. As a result, in order to work as an auditor, one must be a chartered accountant. Assume, however, that a corporation hires an LLP to serve as its auditor. In that instance, the CA partners are authorised to act as auditors and have the authority to sign on the firm’s behalf.
- Fraud Reporting
Since an auditor examines a company’s records of finances, he may come across a fraudulent transaction on occasion. This is justification enough for the auditor to suspect that someone committed fraud against the organisation.
Because the books of accounts are kept by the company’s authorities, the auditor must conclude that some of the employees committed fraud. In such cases, he must reveal the copy to the central government or, in the case of the Company, the Board of Directors.
- Maintain Confidentiality and Integrity
An auditor must learn to conceal their identity. As an auditor, he has access to sensitive corporate information, which he must not expose to anybody without the firm’s express authorisation. Furthermore, when auditing the accounts, the auditor must be truthful.
