Qualification, Appointment and Removal - Company Auditor, Auditing & Secretarial Practice | Auditing and Secretarial Practice - B Com PDF Download

To be an efficient auditor, an auditor must possess certain professional qualifications and professional and personal qualities.

Professional qualification: - An auditor is a professional accountant. So he must possess certain professional qualifications. Under the Companies Act, an auditor of a joint stock Company must be a Chartered accountant within the meaning of the Chartered Accountants Act of 1949. To be a Chartered accountant, he must pass the C.A examination conducted by the Institute of Chartered Accountants. He must also obtain a certificate from the institute from the Institute of Chartered Accountants to take up public practice of accountancy.

Professional Qualities: - To perform his work efficiently, an auditor must possess certain professional qualities. They are :

1. Knowledge of principles and practice of general accounting.
2. Knowledge of Cost accounting
3. Knowledge of Management accounting
4. Thorough knowledge of techniques of auditing
5. Knowledge of provisions relating to income tax , wealth tax, VAT etc.
6. Knowledge of business laws.
7. Knowledge of economics.
8. Knowledge of Mathematics and Statistics
9. Knowledge of Business Management and Organization and financial administration
10. Knowledge of report writing.
11. Knowledge of technical details of the business under audit.
12. Knowledge of the accounts of the business under audit.

Personal Qualities or General Qualities: - Besides the professional qualities, an auditor must also have certain personal or general qualities to perform his work efficiently and smoothly. The requisite personal qualities are : 

(i) Honesty and Integrity.

(ii) Tactfulness

(iii) Vigilance

(iv) An enquiry mind

(v) Methodical

(vi) Care and Skill

(vii) Diligence

(viii) Judgement.

(ix) Responsibility

(x) Impartiality and independence.

(xi) Common sense

(xii) Ability to communicate

(xiii) Ability to work hard

(xiv) Patience

(xv) Courtesy

(xvi) Ability to maintain secrets.

Classification of audit or types of audit

Audit can be classified on different types:

1. Classification of Audit on the basis of Organization structure.
2. Classification of audit on the basis of Degree of independence of the auditor
3. Classification of Audit on the basis of method or approach to audit work or on the basis of extent of work to be performed or on the basis of conduct of audit.
4. Classification of audit on the basis specific objectives

Appointment of an Auditor

First Auditor

The first auditor of a company is appointed by the Board of Directors within the month of the Registration of the company. The first auditor, appointed by the Board of Directors will hold office till the conclusion of the first annual general meeting of the company.

If Board of Directors fails to appoint the first auditor, the company may appoint the first auditor in the general meeting. The first auditor appointed by the shareholders in the general meeting, will also be reappointed at the first annual general meeting of the company

Subsequent Auditor

Every subsequent auditor is appointed every year at every annual general meeting by the shareholders. A subsequent auditor appointed by the shareholders at any annual general meeting will hold office till the conclusion of the next annual general meeting.

Appointment of an Auditor by the Central Got

If a subsequent auditor is not appointed by the shareholders at any annual general meeting, the company must bring it to the notice of the central govt. within seven days of the con conclusion of the annual general meeting. On receiving the notice, the central govt. may appoint an auditor to fill the vacancy.

Appointment In Case Of Casual Vacancy

Any casual vacancy in the office of an auditor can be filled up by the board of directors. However, the casual vacancy caused by the resignation of an auditor cannot be filled up by the Board of Directors; it can be filled up by the shareholders at the general meeting. An auditor appointed to a casual vacancy can hold office only till the conclusion of the next annual general meeting.

Removal of an Auditor

An auditor may be removed before the expiry of the term for which he has been appointed.

The first auditor appointed by the directors of the company may be removed before the expiry of his term of office and another person may be appointed in his place by the shareholders at a general meeting by passing an ordinary resolution to that effect.

A subsequent auditor appointed by the shareholders at an annual general meeting can be removed from the office before the expiry of his term of appointment by the shareholders in general meeting by passing an ordinary resolution after obtaining previous sanction of the central govt.

For the removal of any auditor before the expiry of his term of office and for the appointment of another auditor in his place, in the following procedure has to be followed:

First, a special notice of the days containing the proposed resolution to remove an auditor before the term of office and to appoint a new auditor in place must be given to the company by any member interested.

On receipt of the notice of such resolution, the company must send a copy of the resolution to the auditor who is sought to be removed.

After receiving a copy of the proposed resolution, the auditor concerned can make his representation to the company.

There after, if the members desire that the auditor should be removed before his term of office and another person should be appointed in his place, an ordinary resolution should be passed by the share holders at the general meeting.

It may be noted that for the removal of a subsequent auditor, the provisions approval of the central government also must be obtained.

Remuneration of an Auditor

The remuneration of the first auditor is fixed by the Board of Directors, if he is appointed by the Board of Directors. The remuneration of every subsequent auditor, who is appointed by the company, is fixed by the company in the general meeting. Where a subsequent auditor is appointed by the Central government on the failure of the company to appoint the auditor, his remuneration will be fixed by the Central Government.

Legal Status or Position of a Company Auditor

1. An agent of the shareholders.
2. An officer of the company.
3. A servant of the company