Companies Act_practical problems_5

M/s Rao & Rao, a firm of chartered accounts have to be appointed as the auditors of M/s ABC Co. Ltd., a Government company. Explain the steps to be taken regarding the appointment and payment of remuneration to the auditors.

The provisions of section 619 are explained as under :
1. Appointment of auditor
The auditor of a Government company shall be appointed or re-appointed by the Comptroller and Auditor-General of India (CAG). However, the limits specified in sub-section (1B) of section 224 shall apply, i.e., the auditor can conduct the audit of a maximum of 20 companies out of which not more than 10 companies shall have a paid up capital of Rs. 25 lakhs or more.

2. Remuneration of auditor
The remuneration of the auditor of a Government company shall be fixed by the shareholders in general meeting. Alternatively, the shareholders may determine the manner in which the remuneration shall be fixed.

3. Directions by CAG
The CAG has the power –
(a) to direct the manner in which the accounts shall be audited;
(b) to give instructions to the auditor regarding conduct of the audit; and
(c) to appoint a person to conduct a supplementary or test audit of the company’s accounts.

4. Audit report
The auditor shall submit a copy of his audit report to the CAG who shall have the right to comment upon or supplement the audit report in such manner as he may think fit.

Any such comments or supplement shall be placed before the annual general meeting of the company at the same time and in the same manner as the audit report.

However, while preparing the Board’s report, the Board is not required to give any information or explanation in respect of comments or supplement made by CAG, since there is no such requirement under section 217 or any other provision of the Act.