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TYPES OF AUDIT UNDER COMPANIES ACT

 TYPES OF AUDIT UNDER COMPANIES ACT

TYPES OF AUDIT UNDER COMPANIES ACT

TYPES OF AUDIT UNDER COMPANIES ACT

Rajya Sabha recently passed the companies Bill 2012.The new legislation, which would replace the nearly 50-year old Companies Act, 1956 and would encourage companies to undertake social welfare voluntarily instead of imposing the social responsibility.Auditing

After a decade India is set to get a new Company Law that is modern, growth oriented and seeks to shift from control to self regulation.

Key industry chambers welcomed the passage of bill.

The Companies Law is one of the most important and comprehensive legislation after the Constitution of the Nation. This directly indirectly affects all citizens. This bill has 470 Sections and 7 Schedules.  This bill provides basis and flexible framework. The Bill has leaved so many matters for subordinate legislation; rules, regulation, circulars etc.

TYPES OF AUDIT UNDER COMPANIES ACT

TYPES OF AUDIT UNDER COMPANIES ACT

Various types of Audit prescribed under Companies Act,2013:-

TYPES OF AUDIT UNDER COMPANIES ACT

Various types of Audit prescribed under Companies Act,2013
  • Statuory Audit
  • Internal Audit
  • Secretarial Audit
  • Cost Audit

Statutory Audit:- Section 139 to 147 under chapter X of the act contain the provision regarding audit & auditors. Section 139 contains that at the first AGM, every company shall appoint an individual or firm as its auditor who will hold office from the conclusion of that meeting till the conclusion of th sixth AGM. Section 141 contains that a person shall be eligible for appointment as an auditor of a company only if he is a Chartered Accountant and in case of firm whereof majority of partners practicing in India are qualified for appointment as aforesaid may be appointed by its firm name to the auditor of the company. Section 143 which contains provision regarding powers & duties of auditors contains that statutory auditor shall make a report to the members of the company on the accounts and financial statements examined by him. The main provisions regarding statutory audit are:-

  1. Auditors will have access to books of accounts and vouchers etc at all times and he can seek information from offices of the company as he may deem necessary.
  2. In his report, he must state besides other things, whether the financial statements represents a true & fair view of the state of the company’s at the end of financial year.
  3. In case of any qualification in the report, the reason for the same must be stated in report.
  4. Auditor is required to comply with Accounting Standards.
  5. In case auditor suspects any fraud, he must immediately report the same to Central Govt.

Internal Audit:-

Section 138 of the bill contains provisions regarding Internal Audit. The provisions presecribed in bill are very brief in nature which will be substainted by the rules to be prescribed . the provisions contained in the bill are as follows:-

Certain classes or classes of the company as may be prescribed shall appoint an internal auditor who will conduct an audit of the functions and activities of the company and make a report thereon to the Board of Directors.

Any Chartered Accountant (except statutory auditor of the company) or cost accountants or other professional as may be decided by the board, can be appointed to conduct the internal audit 

Cost Audit:-

Section 148 of the bill contains provisions regarding cost audit and contains that a cost audit wherever conducted is in addition to statutory audit conduced under section 143.

Certain classes of companies engaged in production of such goods or providing of such services as may be prescribed and which have a net worth of turnover of such amount as may be prescribed may be directed to get their cost audit records audited.

Cost audit has to be conduced by Cost Accountant in practice who is required to comply with Cost Accounting Standards(CAS)

It shall be duty of the company to give all assistance and facilities to cost auditor which required in course of action.

As per section 143(14), the qualifications, disqualifications, rights, duties & obligations applicable to statutory auditors will also apply to cost auditor.

Secretarial Audit is most effective way to mechanism to ensure the compliance of the multifarious requirements by the corporate enterprises under a host of legislations. It is a part of Legal compliance reporting system. The scope, content, criteria of the audit and of the compliance certificate are framed by the central government and rules are framed in this regard. The secretarial audit is always in the better interest of every corporate management as, an independent professional will certify that the company has carried out the compliances of the Act. This will also serve the larger interest of the shareholders, creditors and employees. The benefit of such audits, its process and other related aspects have successfully been brought out In this article including a checklist of activities, various areas to verify etc.

TYPES OF AUDIT UNDER COMPANIES ACT

TYPES OF AUDIT UNDER COMPANIES ACT

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