AUDIT OF COMPANIES

(Qualification, disqualification, removal of

Auditors, and his rights, duties and liabilities)
 Learning Outcome
• Recognize the qualification and disqualifications of an auditor.

• Ability to understand the provisions related to removal of

Auditor.

• Ability to understand the provisions related to remuneration of

auditor.

• To understand the Company Auditor’s rights, Duties and

Liabilities.

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 Contents
• Meaning of a Company Auditor
• Appointment of an Auditor
• Remuneration of Auditor
• Qualification and disqualifications of an Auditor
• Removal of Auditors
• Status of Company Auditor
• Rights of Company Auditor
• Duties of Company Auditor
• Liabilities of Company Auditor
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 Rights of An Auditor (1)
 In Sole Proprietor and Partnership:
In case of sole proprietor and partnership, the rights and
duties of an auditor are determined by the agreement
entered into by him with the sole proprietor and the
partners.

 In case of companies:
The auditor of the company has the statutory rights
under the Companies Act.
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 Rights of An Auditor (2)
Right to Access the books
and vouchers
Right to obtain information and
explanations
Right to visit branch offices and
access to branch accounts
Right to receive branch audit
reports
Right to receive notices and to
attend general meeting
Right of Lien of Company
Auditor
Lien on Books of Accounts
Lien on Working Papers
Lien on Communication
Documents
Lien on Client’s money

Right to make representation General or Special Lien

Right to sign audit report

Right to seek legal and technical

advice

Right to be indemnified

Right to receive remuneration 5

 Duties of An Auditor
Duties

Duty
Duty to have regarding Duty to the
Statutory Contractual
Reasonable mandatory Profession
Duties Duties
care and skill Accounting Itself
Standards

Duty to Other duties

Duty to Duty to under the
follow
report Enquire Companies
CARO
Act

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 Liabilities of An Auditor
Liabilities of an
Auditor

On the basis of On the basis of Other

legal Nature of Liabilities
implications Liability

Criminal Civil
Liability Liability

Liabilities
Liabilities under Liabilities
under Liability Liabilities for Liability
Chartered under any to third to articled
Companies unlawful acts
Accountants Special Act parties clerks
Act of the client
Act

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 1. On the basis of legal implications
(Liabilities under the Companies Act)
Misappropriation and retention of client’s money

Misstatements in the Prospectus under section 62

False statement in the returns, reports, etc.

Intentional False evidence

Wilful default in report making

Destruction, Alteration of books, etc.

Authorising false statement in prospectus

Inducing fraudulently to invest money.

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 1. On the basis of legal implications
(Liabilities under the Chartered Accountants Act)

Arises on account of professional misconduct

Chartered accountants in practice

Members of the institute in service

Members of the institute in general

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 1. On the basis of legal implications
(Liabilities under the Special Act)
Auditor can be held liable under different special acts,
which can be stated as under:

Under the Banking Companies Regulation Act, 1940

Under the Life Insurance Corporation Act

Under the Indian Penal Code

Under the Income Tax Act

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2. On the basis of Nature of Liability

On the basis
of nature of
liability

Civil Criminal
Liability Liability

Liability for Liability for

Negligence Misfeasance
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