An auditor can be an individual or a firm that has been appointed by the company to execute an audit. in auditor appointment, an audit is a systematic analysis of books, accounts, statutory records, documents, and vouchers of an organization to know how fair and true the financial statements of an organization are. A person needs to be certified by the regulatory authority of accounting and auditing or have certain specific qualifications to act as an auditor. There are two types of auditors:
1. External/Statutory auditor- independent firm engaged by the client
2. Internal auditor- they are employed by the organizations they audit
Appointment process (Auditors): –
- Directors of the company send their letter of appointment to the auditor/audit firm concerned.
- The auditor upon receipt of the letter, will prepare a quotation for the directors of the company
- In addition to the quotation, the auditor will request a copy of the professional clearance letter from the resigning auditor
- Upon approval of the quotation by the directors and the receiving of the professional clearance letter from the resigning auditor, the auditor will send a copy of the Letter of Consent to act as auditor of the company as required under Section 9 (6) of the Companies Act, 2013 and 2 copies of the letter of engagement to be signed by the directors (1 copy is to be returned to the auditor)auditor appointment
First Auditor for a company
All companies registered in India are required to appoint a firm or an individual (ideally CA) as its first auditor after its incorporation. Accounts of a company are audited by this individual or firm. Section 139(6) of the Companies Act 2013 deals with the appointment of the first auditor of a company.
The procedure is as follows:
1. The first auditor is appointed within 30 days of the firm’s incorporation.
2 . The company should also decide to pass a resolution for auditor appointment of the first auditor of the company to be in the office till the conclusion of the first annual general meeting.
3. The company should also decide to obtain a written certificate from the first auditor of the company that everything will be by the company act
4. The auditor needs to be intimated within seven days from the appointment date
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Cost accountant in practice means a cost accountant who holds a valid certificate of practice who is deemed to be in practice thereof and includes a firm or limited liability partnership of cost accountants.
Only a CA can be appointed as a cost auditor
The procedure for this has undergone many changes
1. Approval of central Government not required
2. Filing of forms 23C and 23D is not required
3. Time limit for appointment of cost auditor to be filed with MCA enhanced
4. Nominal fee for intimation of appointment has changed
5. Fee of cost auditor to be ratified by shareholders
It is an extensive review of an organization following regulatory guidelines. Auditors review security policies, user access controls, and risk management procedures throughout a compliance audit
Things that are examined in a compliance audit will vary depending on whether the company is private or public, the kind of data it handles, and whether it stores and shares sensitive data. As per section 139(1), every company shall appoint at its 1st annual general meeting an individual or a firm as an auditor of the company who shall hold office who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting by auditor appointment
The general principles for this are:
1. Auditors should plan and conduct the audit with professional skepticism and exercise professional judgment throughout the audit process
2. Quality should be maintained
3. Auditors should have access to the necessary
4. Auditors should consider audit risks
5. Materiality should be maintained
6. Preparation of sufficient audit documentation
7. Determine audit scope
8. Identify subject matter and suitable criteria
9. Understand audit entity
10. Understand the environment
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Auditor appointment letter:
Name of Auditors Firm,
Address of Firm
Subject: Appointment as Auditor at Annual General Meeting.
We are pleased to inform you that your firm has appointed/reappointed as Auditor of our company under section 139 of the Companies Act 1956. Vide the resolution passed at the Annual General Meeting of the shareholders which was held on…… (Date of AGM)
“Resolved that the auditor of the company, ……..( Name of the firm), Chartered Accountants, (Membership no.), who entire at this at the meeting, being eligible and willing to act as Auditor, be and are hereby appointed/reappointed as the auditor of the company to hold office till the conclusion on the next Annual General Meeting at a remuneration to be fixed by the Board of Director with consultation with them”
We would be grateful if you would kindly send us your acceptance of this appointment.
Name of Company
Signature of Director