by Auditor Rights
An auditor is a party that examines a client’s financial statements with the objective of presenting their opinion. Auditors are financial professionals qualified to conduct an entity’s audit. Usually, they are a member or associate of an accounting body. Auditors evaluate the validity of an entity’s financial statements and the information provided within them.
Right to have Legal and Technical Advice:
He has a right to seek the opinion of the experts and, thus, take legal and technical advice. This is necessary to give his opinion in his report. He has a right to receive his remuneration provided he has completed the work which he undertook to do.
Right to receive Notice and other Communications relating to General Meeting and attend them:
Under section 231 an auditor of a company has a right to receive notices and other communications relating to General Meeting in the same way as a member of the company. He is also entitled to attend any General Meeting which he attends or any part of the business which concerns him as an auditor.
According to the power of the auditor, he may make any statement or explanation with regard to the accounts as he may desire. He need not, however, answer any questions.
Ordinarily, it is not necessary for the auditor to attend every General Meeting, but it will be good for him to attend meetings in the following circumstances:
(a) When his report contains important qualifications directly affecting the management, so that his remarks may not be misunderstood or misinterpreted.
(b) When he has received a notice from the company that someone else is going to be proposed for appointment as auditor of the company at the Annual General Meeting.
(c) When he has been specially asked by the management to be present.
Right to visit Branches:
According to section 228, if a company has a branch office, the accounts of the office shall be audited by the company’s auditor appointed under section 224 or by a person qualified for appointment as auditor of the company under section 226.
Where the Branch Accounts are not audited by a duly qualified auditor, the auditor has a right of access at all time to the books, accounts and vouchers of the company and thus, may visit the branch, if he deems it necessary.
Right to obtain Information and Explanations:
He has a right to obtain from the Directors and officers of the company any information and explanation as he thinks necessary for the performance of his duties as an auditor.
This is another important power in the hands of the auditor. He will, however, decide as to which information or explanations he thinks necessary to obtain. It the Directors or officers of the company refuse to supply some information on the ground that in their opinion it is not necessary to furnish it, he has a right to mention the fact in his report.
Right of being indemnified:
Under section 633, an auditor (being an officer of a company), has a right to be indemnified out of the assets of the company against any liability incurred by him defending himself against any civil and criminal proceedings by the company if it is proved that the auditor has acted honestly or the judgement delivered is in his favour.
Right to Signature on Audit Report:
Under section 229, only the person appointed as auditor of the company, or where a firm is so appointed, only a partner in the firm practicing in India, may sign the auditor’s report, or sign or authenticate any other document of the company required by law to be signed or authenticated by the auditor.
Right to Correct any Wrong Statement:
The auditor is required to make a report to the members of the company on the accounts examined by him and on every Balance Sheet and Profit and Loss Account and on every other document declared by this Act to be part of or annexed to the Balance Sheet or Profit and Loss Account which are laid before the company in General Meeting during his tenure of office. The Directors have a duty to prepare them and present them to the auditor.
The auditor cannot require but advise the Directors to amend their system of maintaining accounts if it is faulty. If his suggestions are not carried out, he has a right to refer the matter to the members. If the method of accounting is inadequate, he must state the fact in his report that proper books of accounts have not been kept by the company.
Right of Access to Books of Accounts:
Every auditor of a Company has a right of access at all times to the books of accounts and vouchers of the company whether kept at the head office of the company or elsewhere.
Thus, the auditor may consult all the books, vouchers and documents whenever he so likes. This is his statutory right. He may pay a surprise visit without informing the Directors in advance but in practice, the auditors inform the Directors before they pay their visits.
Duties
Duties towards Government:
- Assist the Investigation u/s 237: It is duty of auditor to assist the investigation ordered by the CG u/s 237.
- CARO-2003: The auditor has to report para-wise that the company has fulfilled all the requirements of CARO-2003.
Duties towards Company:
- Statutory Report: Section 165 requires that the auditor has to certify the statutory report.
- Prospectus: According to Sec 56, the auditor is required to certify profits or losses, assets & Liabilities and dividend paid etc in the prospectus.
- Public Deposits: Section 58AA requires the auditor to report about whether the company has followed all rules and guideline of RBI in regard to public deposits or not.
- Insolvency (Section 488): If the company wants itself to be declared insolvent, it is duty of auditor to prepare profit and loss a/c for the current period.
- Signature on Audit Report: Section 229: It is duty of auditor to sign on his report.
Duties towards General Public:
- He should reveal all material information regarding the state of affairs of the company to the company as well as to the general public.
- His office is of confidence and faith. He must be reliable in all respects.
- While issuing prospectus u/s 56, he should see that the prospectus does not include any misleading information or material.
Duties towards the shareholders:
- State that balance sheet and profit and loss a/c give all information required by law.
- Report shareholders about true and fair state of affairs of the company.
- State that balance sheet and profit and loss a/c agree with the books of account.
- State that he has obtained all the necessary information.
- State that balance sheet and profit and loss a/c agree with accounting standards.
- State whether the company has maintained all books as required by law
- State the reasons of qualification in his report.
- State that he has received the audit report on the branch accounts audited by other auditor and how he has dealt with the same in preparing his report
- Auditor shall state in his report whether:
a) The loans taken are properly secured and the terms of loans are not against the interests of the company.
b) Loans given are shown as fixed deposits and the terms of loans are not against the interests of the company.
- Transactions recorded as book entry are not against the interests of the company
- Personal expenses of directors have not been charged to revenue a/c of company;
- The company fulfills the requirements of CARO 2003.
