I hope you're aware that there are 108 sections of the Companies Act 2013 which have been under changes. The most of them are notified so far and 13 more sections are yet to be notified.
The MCA may soon issue one or more notification to give way to these sections.
As you also know that the AGM season has been kicked-off in India. As a matter of agenda, the item related to 'Statutory Auditor and his remuneration' hold very significance at such meeting.
Therefore; In this write-up; my focused shall be on the changes introduced in the Auditor concept.
Let me brief you that there are five sections of this chapter has been changed a bit including insertion of new proviso under Section 147 and also all such changes have been notified.
Section 139 - Appointment of auditors
In the earlier, the section mandated, the Company shall Ratify the appointment of the statutory auditor at its every AGM. As per the section 102 of the Companies Act 2013, there are four ordinary matters shall form part of the meeting, accordingly, the Ratification to be proposed by the Company.
However, in the recent amendment notified on 7th May 2018, such requirement has been done away, consequently, the ordinary business shall form part of the AGM has been reduced from four to three
Section 140 - Removal, the resignation of an auditor and giving of special notice
As of now, if an auditor has resigned from the office of statutory auditor has to give a statement of reasons in ADT 3 to the Company and the Registrar within 30 days of his resignation and, if he fails to file such statement, he shall be liable for a fine not less than Rs 50,000.
However, as per the amendment notified w.e.f. 9th February 2018, the changes have been made in the 'penalty clause' by prescribed a maximum limit of the penalty if he fails to intimate about his resignation within 30 days.
Section 141 -Eligibility, Qualifications, and Disqualification of auditors
As the heading of the section is clear. The section gives a list of persons prohibited to act as statutory auditor of the company. In the earlier, if a person whose subsidiary, associate, or any other form of entity is being engaged on the date of his appointment in consulting and provides specialized services as mentioned in section 144 shall not be eligible to act as a statutory auditor of the company.
However, in the recent amendment approved on 9th February 2018, the entire clause has been replaced with a new clause contained such disqualification.
Now, if any person, directly or indirectly, provides any services as mentioned under S 144 to the company, holding company, and the subsidiary company shall not be eligible to act as statutory auditor of the company.
Section 143 - Powers and duties of the auditors and auditing standards
In this section 3 changes have been taken place w.e.f. 9th February 2018.
The changes include an addition of word 'associate company', 'Internal financial control with reference to financial statements', Cost Accountant in practice has been replaced with Cost Accountant.
Such changes under sub-section 1, 3, and 14.
5. Section 147 - Punishment for contravention
There are four changes have been notified under the said section.
As the section is very clear.
147 protects the compliance and stands-in-support to ensure good corporate governance.
In the recent amendment w.e.f. 9th February 2018, the central Government in the wake of wrongdoing on the part of the statutory auditor, the amount of contravention has been increased to four times of their remuneration.
Now, if an auditor of the company griped in contravention of S 139, 143, 145 shall be liable for not less than INR 25,000 to INR 500,000 or four time of his remuneration, whichever is less.
The word members or creditors of the company has also been inserted under sub-section 3 as an entitled to get compensated by the Statutory auditor if any loss arisen due to his incorrect or misleading statements given in his report.
One new proviso has been inserted under sub-section 5 to provide that in case of criminal liability of the audit firm, the concerned partner or partners of the firm shall be liable.
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