Things to keep in mind while appointing Auditor for the Company


Generally, when it comes to understanding a company’s financial statements, it is more of a hard nut to crack for a normal shareholder. This is where work of an auditor comes into the picture.

The auditor here acts as a conducive, he retrospects the financial statements of the company to check whether accounts have been properly prepared in accordance with the Companies Act and make independent report to the shareholder.

Q. What is the eligibility for company’s auditor?

A. With reference to section 226 of the companies act, a person should not be qualified for appointment as an auditor or a public or private company unless he is a chartered accountant within the meaning of the Chartered Accountant Act, 1949.

Q. What are roles and responsibilities of an auditor?

A. Roles and responsibilities of an auditor are mentioned as under:

1. The auditor of the company must have access to books of accounts and vouchers of the company. He must be entitled for any information and explanation that is fundamental for the performance of his duties, that are:

• The loan and advances made on the basis of security are properly secured and are inequity to the interest of the company and its members.
• Whether transaction of the company incorporates by book entries are in collision with the interests of the company.
• If loans and advances deposits made by the company are correctly shown or not.
• If personal expenses have been charged to revenue account.
• It is mandatory to check whether the position as stated in the account books and the balance sheet is correct and regular.

2. A report must be made by the auditor to the shareholders of the company. The report must include whether financial statements give a fair view of the state of the company at the end of the financial year.
The report must also include the following:

• It must include that entire information is to the best of his knowledge.
• Proper books of account are kept by company law in his opinion as required by the law.
• To check whether the company has followed all accounting standards while preparing financial statements.
• If the company has a satisfactory internal financial control system.

3. If it is a government company, the Comptroller and Auditor-General of India shall appoint the auditor. The direction must be given beforehand for the accounts required to be audited and shall submit a copy of the audit report to the Comptroller and Auditor-General of India.

4. If the auditor of a company has reason to believe that an offensive involving fraud is being committed against the company by officers or employees. The auditor must straightaway report to the Central Government within the time span.

In the above article, we have tried to focus on the eligibility criteria for an auditor and the roles and responsibilities that one can keep in mind while appointing an auditor.


Note – Please note that the above article is for education purpose only. This is based on our interpretation of laws which may differ person to person. Readers are expected to verify the facts and laws.

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