Remuneration of an Auditor
a)
The general rule is that the appointing
authority is authorized to fix the remuneration of an auditor as per Section
224(8). Remuneration includes the sum paid by the company in respect of the
auditor’s expenses.
b)
In the case of a new company where the auditors
are appointed by the board of directors, the remuneration will be fixed by the
board of directors. Similarly, if an auditor is appointed to fill a casual
vacancy the remuneration will be fixed by the board of directors.
c)
When an auditor is appointed by the Central
Government the remuneration will also be fixed by the Central Government.
d)
If the auditor’s appointed at the annual general
meeting, the remuneration is also fixed at the annual general meeting.
e)
Where the auditor is reappointed in the next
annual general meeting, the amount fixed in the previous year is considered for
the currency year also, if nothing more is specifically provided as
remuneration in the current annual general meeting.
f)
A part from the routine audit work, if a
chartered accountant is entrusted with the work of taxation, writing up of the
account books and other professional services then the auditors and the board
of directors can fix up the remuneration mutually for the additional work.
Moreover, the sanction of the share holders is not needed for the same. Any
remuneration paid for services other than routine audit work should be
explained in the Profit and Loss account separately as under:
i)
Remuneration as an Auditor of the company.
ii)
In the capacity of an adviser in respect of:
Ø
Taxation representation.
Ø
Company Law matters
Ø
Management Services.
Ø
Internal Auditing
Ø
Other professional services and
Ø
For travelling and out of pocket expenses.
Audit Ceiling Sec 224
(1B)
Ceiling refers to restriction on
the no. of corporate audits that can be held by a Chartered accountant or firm
of chartered accountants. As per
provisions of Section 224(1B) of The Companies Act 1956, No company or its board of director shall
appoint or reappoint any person or firm as its auditor if such person or firm,
at the date of appointment;
a)
Is in
full time employment elsewhere, or
b)
Is
holding appointment as auditor of the/more than specified number of companies.
The maximum limit of company audit is 20 companies per person. Out of
which not more than 10 should be companies having paid up capital of Rs. 25
Lacs or more. But In case of a partnership firm, the limit is 20 companies per
partner who is not in full time employment elsewhere.
If a chartered accountant is partner in more than one firms or he is
partner as well proprietor, the limit still is 20 companies per person. For
Calculating no of Audits, the following points is to be considered:
INCLUDED (For
Calculation)
EXCLUDED
Part Audit Branch
Audit
Joint audit Corporations
which are not company
Audit of Sec. 25
Company. Foreign
company
Audit of Govt.
Co. Guarantee
co. not having share capital
Special
audit
Private
company.
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