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Saturday, January 18, 2014

IGNOU SOLVED ASSIGNMENTS

Qualification and Disqualification of an Auditor

According to Section 226(1) and 226(2) of the Companies Act, the prescribed qualifications of an auditor are as follows:
a.Qualification [sec226 (1)]:
a. The auditor of a co. may be either, an individual or a firm

b.In the case of an individual, he should be a Chartered Accountant within the meaning of Chartered Accountants Act 1949 i.e. he should be holding certificate of practice.
c. In the case of firm of auditor’s all the partners of a firm shall be chartered accountants practicing in India within chartered accountants Act 1949.

b.Qualification [Sec 226(2)]: A person holding a certificate  issued by central govt. under restricted state auditors  rules prior to the  enactment of part B state laws 1951 can also be auditor of the co.
The central government in empowered to frame rules relating to granting renewals, suspension or cancellation of such certificates.

Disqualification of a Company Auditor:
According to section 226(3) of the Companies Act, the following persons shall not be appointed as auditors of a company:
i.         A body corporate. A company cannot audit any other company,
ii.       An officer or employee of the company.
iii.      A person who is either a partner or employee of an officer or employee of the company.
iv.     A person who has taken debt from the company for amount exceeding Rs. 1,000.
v.       A person who has taken guarantee of another person who has taken a loan exceeding Rs. 1,000 from the company.
vi.     A person who holds shares or debentures of the company cannot audit that company.
A person, who is disqualified for being appointed as auditor of a company, is automatically disqualified for being auditor of its holding company or its subsidiary company or any other subsidiary of holding company.

Removal of Company Auditor U/S 224(7) Companies Act, 1956
The removal of auditor shall be authorized only by the shareholders in the General Meeting (GM). Ordinary resolution is sufficient to remove an auditor. The removal may be of the following types:
1. Removal of first auditor
2. Removal of regular auditor other than the first auditor
In case of removal of auditor of first auditor, there is no need for central govt’s prior permission.
The removal of auditor other than first auditor can be further classified as:
1. Before the expiry of term of office
2. On the expiry of term of office

Where the Co. wishes to remove the auditor before the expiry of term of office the following procedure shall be followed:

Step I: A special notice of not less than 14 days is to be given by a shareholder to the Company for removal of the Auditor and appointment of new auditor subsequent to the removal of Auditor.

Step 2: Obtaining a certificate in writing from the new auditor to the effect of his eligibility to act as auditor, if appointed;

Step 3: Holding a board meeting of the Company to pass the necessary resolutions to:
(i) consider the special notice for removal of Auditor given by the shareholder and to decide the day, time and place for calling the EGM;
(ii) to approve the draft notice of EGM and explanatory statement thereof and to authorize the company secretary or director of the Company to issue the notice;
(iii) to authorize the director or manager of the Company to make an application to the Central Government under Section 224(7) for removal of the Auditor; and(iv) to authorize the company secretary or director of the Company to inform the Auditor of the decision of the board of his removal.

Step 4: Intimate the Auditor of his removal in writing along with a copy of the special notice as given by the Shareholder.

Step 5: Holding of EGM to pass the necessary resolutions to:
(i) approve removal of the Auditor from the office of statutory auditors of the Company;
(ii) appointment of new auditors subject to approval of regional director to hold office until the conclusion of next AGM;
(iii) to authorize the director, company secretary or manager of the Company to intimate the new auditor of his appointment; and
(iv) to authorize the director or manager of the Company to make an application to the Central Government (Regional Director)under Section 224(7) of the Act for removal of the Auditor.

Step 6: Making application to the Regional Director(Central Government) in whose jurisdiction the registered office of the Company falls in e-Form No. 24A along with the following documents:
(i) Copy of ordinary resolution;
(ii) Copy of special notice under section 224(7) of the Act;
(iii) Copy of the representation, if any, made by the Auditor.
(iv) Grounds of making application for removal of Auditor.

Step 7: Upon receipt of approval from regional director intimate the new auditor of his appointment as an auditor of the Company to hold the office until the conclusion of next Annual General Meeting.