Company Audit

Question 1

Eligibility & qualification

Answer 1

Sec 141(1) - (2)

Question 2

Disqualification to a body corporate to be the auditor other than LLP

Answer 2

Section 141(3)(a)

Question 3

Disqualification to officer and employee of the company

Answer 3

Sec 141(3)(b)

Question 4

Disqualification to person who is a partner or en employee to the officer or employee of the company

Answer 4

Sec 141(3)(c)

Question 5

Disqualification due to securities holding or direct or indirect debtness

Answer 5

Sec 141(3)(d)

Question 6

Disqualification due to business relationship

Answer 6

Sec 141(3)(e)

Question 7

List of service not to be rendered, whether directly or indirectly, by auditors to company its holding and subsidiary

Answer 7

Section 144
Ac and book keeping
Internal audit
Design and implementation of FIS
Actuarial services 
Investment advisory services
Investment banking 
Outsourced financial services
Management services

Question 8

A person whose relative is a director or is in employment of the company as director or KMP is disqualified under

Answer 8

Sec 141(3)(f)

Question 9

Disqualified if limits for number of audits is crossed or full time employment elsewhere

Answer 9

Sec 141(3)(g)

Question 10

Disqualified due to convicted by the court and ten year has not lapsed yet

Answer 10

Sec 141(3)(h)

Question 11

Any disqualification attracted after the appointment then he should vacate the office under

Answer 11

Sec 141(4)

Question 12

First auditor of government company or any statutory corporation owned and controlled by government

Answer 12

Section 139(7)
CAG Within 60 days of incop
If fails BOD within next 30 dAys
If fails member within 60 days in EGM

Question 13

Subsequent auditor of govt company

Answer 13

Sec 139(5)
CAG within 180 days of commencement of financial year
If fails existing will be reappointed
Existing fails then casual vacancy

Question 14

First auditor of non govt company

Answer 14

Sec 139(6)
BOD apt within 30 days
If fails inform members
Member will appt within 90 days of receiving info in EGM

Question 15

Subsequent auditor of non govt company

Answer 15

Section 139 (1)

Question 16

Situations when retiring auditor cannot be reappointed

Answer 16

Sec 139(9)

Question 17

Rotation of auditors

Answer 17

Section 139(2)
Listed mandatory
Unlisted public company paid up share capital more than or equal to 10 crore or borrowing from banks and FI or public deposit more than or equal to 50 crore
Private company other than OPC and Small company which paid up share capital is more than or equal to 50 crore or borrowings from bank and FI more than or equal to 50 crores

Question 18

Casual vacancy

Answer 18

139(8)
Auditor shall file Adt-3 in case of resignation to company, ROC and CAG if it fails then-
Min - 50000 or remuneration of auditor, wel
Maximum - upto 500000

Question 19

Remuneration of auditors

Answer 19

Section 142
Fixed by members
First auditor - fixed by board of directors

Question 20

Removal of auditors before the term of expiry

Answer 20

Sec 140(1) 
Application to CG in ADT 2 (30 days)
Then after approval from CG within 60 days approval from members by passing a special resolution in meeting

Question 21

Appointment of auditor other than retiring auditor

Answer 21

Section 140(4)
Special notice u/s 115 ( 1% voting power or shares with paid up capital at least 5 lacs )
Auditor make written representation to be sent atlest 7 days before meeting
Special resolution to be passed to pass that existing auditor should nit be reappointed

Question 22

Removal of auditor by NCLT

Answer 22

Section 140(5) 
Application can be made by CG or any other person can be done suo motto too 
If NCLT is satisfied them if application made by CG then will appt within 15 days or if application by someone else then it will lead to casual vacancy

Question 23

Right as well as duty to attend general meeting by auditor

Answer 23

Section 146

Question 24

Is auditor concerned about the propriety of business conduct ? If yes, then mention the areas of propriety.

Answer 24

Section 143(1)
1 loans And advances given are SIR
2 whether transactions of company which is represented merely by the book entries are prejudicial to the company interest
3 where company is not an investment company or banking company whether any securities has been sold in price lower than the cost of purchasing it
4 whether loans and advances made are shown as deposits
5 whether personal expenses has been charged to revenue account
6 whether any shares allowed for cash and if yes whether cash was received for such allotment

Question 25

Matters to be compulsory reported by the auditors

Answer 25

Section 143(3)
Whether the auditor has obtained all the info and documents required p
Whether proper books of accounts is BIENG maintained or not
Whether he has received the branch audit report conducted under section 143(8)
Whether company’s b/s and profit loss are in agreement with BOA
Followed accounting standards
Observation or comment on the entity’s financial transaction
Director disqualification under 164(2)
Any qualification, adverse or reservation relating to maintenance of accounts
Adequate IFC-FR
Whether the company has disclosed the impact of pending litigation
Whether provision is being made for the material foreseeable losses
Any delay in transferring amount required to IEPF

Question 26

Compliance with auditing standards

Answer 26

Section 143(9) &(10)

Question 27

Duty to sign audit report

Answer 27

Section 145 to be read with clause 12 part 1 first schedule

Question 28

Duty to report fraud

Answer 28

Section 143(12)
Clause x of Caro, 2016
SA -240

Question 29

Penalties to company and officers for contravention of section 139-146

Answer 29

Section 147(1)
COMPANY
MIN - 25000
MAX - 5 lakhs
OFFICER 
FINE
MIN - 10000
MAX - 1 lakhs 
Or imprisonment upto a year 
Or both

Question 30

Punishment for contravention of section 139,141,142,143,144 & 145 to the auditor

Answer 30

Section 147(2)
If offense was unintentional
MIN - 25000
Max - 5 lakhs or 4 x audit remuneration WEL
If offense was intentional
MIN - 50000
Max - 25 lakhs or 8x audit remuneration WEL

Question 31

If convicted under section 147(2)

Answer 31

Under section 147(3)
Refund the remuneration
Pay damages to company, statutory bodies, member and creditors of the company for loss arising out of misleading statements

Question 32

Branch audit

Answer 32

Section 143(8)

Question 33

Cost audit

Answer 33

Section 148

Question 34

Cost audit report

Answer 34

In FORM CRA 3

Question 35

Cost audit report after comments on negative points by cost auditor to central government

Answer 35

FORM CRA 4 within 30 days of cost audit report received

Question 36

When to maintain cost records

Answer 36

Company operating under prescribed regulated or non regulated sector making prescribed products and hence total turnover such prescribed product is equal to or more than 35 crores
Except if company is registered under MSME development act

Question 37

When to get cost records audited

Answer 37

REGULATED SECTOR
Overall turnover 50 crores or more ( only products with turnover of 25 crore or more )
UNREGULATED SECTOR
Overall turnover 100 crore or more (only products with turnover 35 crores or more)

Question 38

Contents of the certificate to be submitted by the auditor at the time of appointment

Answer 38

That is the individual is eligible and not disqualified for appointment under the CA Act, 1949
The proposed appointment is as per terms provided under the act
The proposed appointment is within the limits laid down by or under the authority of the act
List of proceedings pending with respect to professional matters of conduct as disclosed in the certificate is true and correct

Question 39

Directors responsibility statement contents

Answer 39

Section 134
Applicable AS has been followed if not explanation for such

Director has selected such accounting policies and applied consistently and made judgements and estimates which a are reasonable and prudent so as to give true and fair view

Proper and sufficient care of maintenance of adequate records

Annual account on going concern basis

Internal financial controls were adequate and operating effectively

Proper system for complying with all the laws and regulations applicable