Appointment and Remuneration of Auditors

Section 134 of the Companies Act, 1963 (Act 179) provides the modalities for the appointment and remuneration of the auditor of a company.  We take a brief look at the provisions very important to us as auditing students.

 

1.   Appointment of Auditors (Subsection 1- 10)

For a person to be appointed as auditor of a company, the following must be met:

·        The auditor consented in writing to be appointment before the appointment;

·        The auditor is duly qualified to be appointed as auditor of the company.

When a partnership firm is appointed as auditors of a company, the partners are deemed appointed as the auditors and they should be duly qualified.

 

                             I.        First Auditors

a)   The first auditors of the company should be appointed by the directors within three (3) months;

b)   The first auditors hold office until the conclusion of the first annual general meeting;

c)   If the directors failed to appoint auditors within the three (3), the Registrar will appoint the auditors.

 

                           II.        Subsequent Auditors

a)   At each annual general meeting, the company (members) shall appoint the auditors through ordinary resolution of the company;

b)   The auditors hold office from the conclusion of that meeting to the conclusion of the next annual general meeting;

c)   If no auditor is appointed at the annual general meeting, the Registrar shall appoint the auditors.

 

                          III.        Casual Vacancy

Casual vacancy occurs when the auditor ceases to be qualified for appointment; the auditor resigns from office by notice in writing to the company and the demise of the auditor.

 

a)   Any casual vacancy shall be filled by the directors;

b)   Auditors so appointed shall hold office till the conclusion of the next annual general meeting

c)   If directors do not appoint auditors to fill casual vacancy with three (3) months, the Registrar shall appoint the auditors.

 

The company should give notice to the Registrar within twenty-eight days of changes in the auditors.

2.   Remuneration of auditors ( subsection 11 – 14)

The fixation of the remuneration of the auditor depends on the authority appointing the auditor.

a)   If the auditors are appointed by the directors, the directors shall fix the remuneration;

b)   If the auditors are appointed by the Registrar, the Registrar shall fix the remuneration;

c)   In all other cases the company (members) shall fix the remuneration by ordinary resolution or in a manner that the company by ordinary resolution may determine.

 

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