According to the sec.224 of the companies Act, 1956, every company shall appoint an auditor to audit the books of accounts of the company. After completing the audit, the auditor has to submit his report to the shareholders of the company. The shareholders do not take part in the day to day management of the company. The auditor acts like as an agent of the shareholders. That is why the position of the auditor is very vital. Auditor reports to the shareholders about the finances of the company. This is one of the most reasons why the audit of the books of accounts of a limited company is compulsory.
A person can only qualified for appointment as the auditor of a company only if he is a Charted Accountant within the meaning of the Charted Accountant Act, 1949. Nationality is not as important. A firm where all the partners practicing in India are qualified for appointment like auditors, it can be appointed by its firm name to be auditor of a company. In this type of case, any partner practicing may act in the name of the firm. An individual Charted Accountant, being the sole proprietor cannot be appointed auditor in the name of the firm.
The following persons cannot be qualified for appointment as auditors of a company :
i. An officer or employee of the company
ii. A body corporate
iii. A person holding any security of the company which carries voting rights.
iv. A person who is a partner, or who is in the employment, of an officer or employee of the company.
v. A person who is indebted to the company for an amount exceeding one thousand rupees, or who has given any guarantee or provided any security in connection with the indebtedness or any third person to the company for an amount exceeding one thousand rupees.
Some areas of study are given below:
1. Appointment of Auditors
2. Ceiling on number of Audits
3. Auditor’s Remuneration
4. Disclosure of remuneration in Final accounts
5. Steps to be taken by the auditors before accepting the appointment
6. Removal of auditor
7. Appointment of a new auditor in place of retiring auditor
8. Rights and powers of an auditors
9. Scope of duties of an auditor
10. The auditor’s lien
11. Audit of Branches
12. Gist of important circulars
14. Capital Profits