Ensuring compliance with auditing requirements under the Companies Act, 2013 is crucial for maintaining corporate governance and financial integrity. This comprehensive checklist provides an overview of the key sections, rules, and compliance forms to help avoid defaults and ensure adherence to statutory requirements.
| Aspect | Provisions | Significant Points to Avoid Defaults |
|---|---|---|
| 1. Appointment of Auditors | - Section 139: Governs the appointment and tenure of auditors. - Rule 3: Details procedure for the first appointment. - Form ADT-1: Filing requirement for appointment. | - First Appointment: Must be completed within 30 days of incorporation using Form ADT-1. - Tenure: Maximum of 5 years; reappointment allowed for up to 2 terms. - File Form ADT-1 within 15 days of appointment. - Government Companies: Appointment managed by Comptroller and Auditor General (C&AG) or Board (Rule 6). |
| 2. Removal and Resignation | - Section 140: Prescribes the process for removal of auditors before their term ends. - Section 139(9): Details on resignation of auditors. - Form ADT-3: Filing for resignation. - Rule 7: Requires notice of removal. | - Removal: Requires Central Government approval (Section 140(1)). - File Form ADT-3 within 30 days of resignation (Section 140(2)). - Special Notice: Required for appointing new auditors or not reappointing retiring auditors (Section 140(1)). |
| 3. Eligibility, Qualification, and Disqualification | - Section 141: Defines eligibility and qualifications for auditors. - Rule 4: Lists disqualifications. - Rule 4(2): Additional details on disqualifications for firms. | - Eligibility: Chartered Accountant or firm with qualified CA members. - Disqualifications: Includes relationships with the company, or common partners with disqualified firms (Section 141(3)). - Specific Disqualifications: Applies to firms with certain relationships with the company or partners who are disqualified (Rule 4). |
| 4. Remuneration | - Section 142: Provides for the fixation of auditor remuneration. - Rule 11: Details how the remuneration should be fixed and disclosed. | - Fixing: Must be approved by the general meeting or Board. - Include: Audit fees and any additional expenses. - Ensure that the remuneration is in line with the requirements under Section 142. |
| 5. Powers and Duties | - Section 143: Outlines the powers and duties of auditors. - Rule 11: Specifies the contents of audit reports. - Section 143(12): Requires reporting of frauds. - Section 143(16): Defines penalties for non-compliance. | - Rights: Auditors have the right to access books, records, and require information (Section 143(1)). - Report Contents: Must include compliance with accounting standards, internal controls, and necessary disclosures (Rule 11). - Fraud Reporting: Suspected fraud must be reported to the Central Government and the audit committee or board (Section 143(12)). - Penalties: Failure to comply with auditing standards and requirements can result in fines or imprisonment (Section 143(16)). |
| 6. Services Not to be Rendered | - Section 144: Prohibits auditors from providing certain services to avoid conflicts of interest. | - Restrictions: Auditors cannot provide services such as bookkeeping, internal audit, or management consulting to ensure objectivity and independence (Section 144). |
| 7. Signing of Audit Reports | - Section 143(2): Requires that audit reports be signed by the appointed auditor. - Rule 12: Outlines filing requirements for audit reports. | - Signing: Reports must be signed by the auditor to be valid (Section 143(2)). - Filing: Ensure that the audit reports are filed within the required deadlines (Rule 12). |
| 8. Attendance at General Meetings | - Section 146: Provides for the rights of auditors to attend general meetings. - Rule 14: Details the notices and attendance requirements for auditors. | - Notices: Ensure auditors receive all relevant notices of general meetings. - Attendance: Auditors are entitled to attend general meetings or have representation (Section 146). |
| 9. Audit Reports | - Section 143(3): Specifies the contents of audit reports. - Section 143(4): Additional reporting requirements for certain companies. - Rule 11: Details on the requirements for audit reports. - Rule 12: Filing requirements for annual financial statements. | - Contents: Audit reports must cover compliance with accounting standards, disclosures, and internal controls (Section 143(3)). - Additional Reporting: Specific disclosures are required for certain companies beyond standard reporting (Section 143(4)). - Timely Filing: Annual financial statements must be filed within 30 days of the annual general meeting (Rule 12). |
| 10. Punishment for Contravention | - Section 147: Outlines penalties for non-compliance with auditing standards. - Section 148: Defines penalties for officers in default. | - Penalties: Non-compliance can result in fines ranging from ₹25,000 to ₹5,00,000. - Officers in Default: Imprisonment up to one year or fines ranging from ₹10,000 to ₹1,00,000 (Section 147). |
Key Compliance Points
- Timeliness: Ensure all appointments, removals, and reports are filed within the specified deadlines to avoid late fees and penalties.
- Documentation: Maintain thorough and accurate records of all auditor-related actions and compliance to support audits and inspections.
- Approval and Notices: Follow the required procedures for approvals, special notices, and communications to meet regulatory requirements.
- Eligibility Checks: Regularly verify the eligibility and disqualification status of auditors to ensure they meet the statutory criteria.
- Reporting: Ensure audit reports are comprehensive, accurate, and filed in a timely manner according to the statutory requirements.
This detailed checklist helps streamline compliance with auditing regulations under the Companies Act, 2013, preventing defaults and ensuring adherence to statutory obligations.
