 INTRODUCTION

 QUALIFICATION OF AN AUDITOR
 DISQUALIFICATION OF AN AUDITOR
 APPOINTMENT OF AN AUDITOR
 REMOVAL OF AN AUDITOR
 REMUNERATION OF AN AUDITOR
 POWERS & RIGHTS OF AN AUDITOR
 DUTIES OF AN AUDITOR
 STATUS OF AN AUDITOR
 PRELIMINARIES TO BE GONE THROUGH
BEFORE THE ACTUAL WORK IS GIVEN
BY
THE AUDITOR
 AUDITORS LIEN
INTRODUCTION :
There are different kinds of organization in all over the world.
Among them company is most important organization and it
completely different from others. The fundamental principle
of company is that it is created by law and it has perpetual life
and here management is differ from ownership.
Shareholders is the owner and board of directors perform
managing activities work. So it is the duty of management to
submit actual position of company to the shareholders and other
related groups. But there some questions may arise about the
fairness of these submitted reports but of all those books or
record are examined by any chartered accountant then
there is no question arise. so according to company act 1994
in our country auditor must be employed in a company.
Now we will know about the company auditor in
this presentation.
QUALIFICATION OF AN AUDITOR

Qualification is very much important factor for any work .it is the
sum of some Specific skill or type of experience. Which needs to
be required for doing any particular job successfully and easily .

Like any other works auditing is a kind of work . The man who is
appointed to do this work is called auditor. The success of auditing
work is greatly depend on the qualification or on the eligibility of
the auditor. He must have some specific requirement to do this
work. in case of company ,to become an auditor , auditor needs to
have following qualification:
 Occupational or statutory qualification:

According to sec 212(1) of company act 1994, an

auditor must be a chartered accountant within the meaning of
Bangladesh chartered accountant act, 1973.
It should be mentioned here that if all the persons of a
firm are eligible to get appointment as auditor , such firm may be
appointed as auditor of any company by it’s name and in such case
any person of that firm can perform the work of auditor by the
name of firm.
General qualification:

In spite of the occupational qualification, an auditor

Needs to have some general qualifications, such as:
1) He should have good knowledge about accountancy.
2) knowledge about company act, industry act, income tax
act.
3) knowledge about business organization, industrial and
financial management.
4) knowledge about mechanical device of book-keeping.
5) Adroit, artistic, sagacious.
6) Honest, impartial etc.
DISQUALIFICATION OF AN AUDITOR :

Sec. 212(2)of the company act , lays down that , none of

the following persons are qualified for appointment as an auditor
of the company. These are –

1) A body corporate.
2) An officer or other employee of the company.
3) A person who is a partner of or who is in the employee
of , an officer or other employee of the company.
4) A person who is indebted to the company for an
amount exceeding Tk 1000 or who has given any guarantee or
provided any security in connection with the indebtedness of any
third person to the company for an amount of exceeding Tk 1000.
 5) A person who is a director or member of a private company ,
or
a partner of a firm , which is managing agent of the company.
6) A person who is a director or the holder of shares exceeding
5%
in nominal value of the subscribed capital of any body corporate.
which is the managing agent of the company.
According to sec. 212(3)-
a) Disqualified for appointment as auditor of any other
body corporate which is that company’s subsidiary or holding
company or a subsidiary of that company’s holding company.
b) He would be disqualified for such appointment had
the said body corporate been a company.
According to sec. 212(4),
If, after his appointment an auditor becomes subject
to any of the disqualification listed above, he shall be deemed
to have vacated his office forth with.

These are the provisions regarding the disqualification

of appointment of an auditor under the company act 1994.
 APPOINTMENT OF AUDITOR
According to the company act 1994 , sec 183(3) every
company must appoint an auditor or auditors to audit its accounts .
The appointment of auditors of a company is made according to the
provisions of various sections of the companies act 1994, which are
explained below:

APPONTMENT OF
AUDITORS

APPOINT
FIRST SUBSEQUENT Appoint by BY CASUL BRANCH
AUDITOR AUDITOR GOVT. SPECIAL VACANCIES AUDITOR
210(6) 210(1) 210(4) RESOLUTION 210(7) 214(1)
210(4)
 APPOINMENT OF FIRST AUDITOR
The first auditors of a company shall be appointed
by
The directors within one month of the date of registration of the
company. The auditors so appointed shall hold office until the
conclusion of the first general meeting. Two provisions have been
attached to the above subsection. Their salient features are as
under

1) The company in general meeting may remove

any such auditor and appoint in his or their place any other person
or persons who have been nominated for appointment by any
member of the company and of whose nomination notice has been
given to the members of the company not less then fourteen days
before the date of meeting.
 2) If the board fails to exercise their powers ,the company in
general
meeting may appoint the first auditor or auditors.

Appointment of a partnership by its name to be auditors of a

company shall be deemed to be the appointment of all the partners
who are partners in the firm on appointment.
  SUBSEQUENT APPOINMENT

Under section 210(1) the subsequent appointment

are explained below:

(1) every company is required to appoint an auditor at each

general meeting to hold office from the conclusion of the next
annual general meeting

(2) where at an annual general meeting no auditors are

appointed or re-appointed ,the government appoints a person
to fill the vacancy.
(3)The company shall within seven days of the government’s power
becoming exercisable give notice of that fact to the government. If
the company fails to intimate this fact to government , the
company and every officer who is in default , shall be punishable
with a fine which may extend to hundred tk.

(4)Where it is found that the appointment of the auditor at the

annual general meeting was invalid .the new auditors in his
place shall be appointed at the general meeting of the
shareholders.
APPOINTMENT OF AUDITOR BY GOVERNMENT:
sec. 210(4)

If no auditor is appointed in the general meeting than the

government may appoint a person to be the auditor of the
company.
  CASUAL VACANCIES, Sec.210(7) :

If the appointed auditor resigns or dies during

his time of office ,the dire place may fill any casual vacancy in
the office of auditor, but while any such vacancy continues the
surviving or the continuing auditor or auditors if any, will fill it.

There are some steps to be taken in regarding this:

1. Any casual vacancy in the office of auditor, expect one

caused by prior resignation, may be filled by the board but the
remaining auditor or auditors may continue to act.
2. When a vacancy has been caused by the resignation of
the auditor, it shall be filled only by the general meeting.
3. An auditor appointed to fill a casual vacancy shall hold
office till the conclusion of the next annual general meeting.
 1. The audit of the accounts of the branches of the company
may be audited by the company auditor.
2. The company may decide to have the accounts of the
branches audited by a person other than the company auditor. In
such a case, the appointment may be made by shareholders in a
general meeting.
3. The board of directors can appoint the branch auditor if
the company has authorized the board of directors to appoint the
branch auditors by a resolution passed in general meeting. While
appointing the branch auditor, the board of directors must
consult the company statutory auditor.
 At first we want to know what do we mean by removal of
auditor? Remove means dismiss from office. Short cut we can say
that when an auditor dismiss form his post than we called removal
of auditor. After what circumstances an auditor remove from his
post are discussed below.
(A) Only by the company in general meeting:

The first auditor of the company appointed by the

board of directors can be removed only by the general meeting of
the company [sec.210(6)]
 (b) Previous approval of government:

Except with regard to the first auditor, any auditor

appointed under the provisions of the companies Act, can be
removed only after obtaining the previous approval of the
Government in that behalf [sec.210(9)]

(c) Notice for removal:

If an auditor is not to be re-appointed at the annual general

meeting a fourteen days notice must be given to him to enable him
to defend himself.[sec.211(2)]
 REMUNERATION OF AN AUDITOR :

The remuneration of an auditor of a company shall be fixed

as under sec .252(8). The rules are given below:

1) If the auditor has been appointed by the board of Director,

it is the board which fixes his remuneration.
2) If the auditor has been appointed by the Government under
certain circumstances, the government fixes his remuneration.
3) If the auditor has been appointed by the shareholders at the
general meeting, it is the company which determines his
remuneration unless the company in general meeting may
delegate The power of fixing his remuneration to someone
else, e.g., the board of directors. It is not necessary that the
remuneration be fixed at the same meeting at which his
appointment has been made.
 (4)The retiring auditor who is automatically re-appointed at
the
annual general meting ,unless a resolution is passed refining
his remuneration is entitled to get the same remuneration as
he was getting previously
5) If an auditor is asked to do any other work over and above
his
normal work at audit ,e.g., preparing the final accounts or income
tax returns , he is entitled to get extra remuneration.

It should be mentioned here that, if any sum by the company

in respect of the auditor’s expenses shall be deemed to be included
in the expression “remuneration”.
  RIGHTS & POWERS OF AN AUDITOR

An auditor to perform his duties must have certain powers

without which it may not be possible for him to perform his
duties honestly and thereby , he might be held for any loss
which the company might suffer.

1. Right of access to books of account [sec.213(1]

2. Right to call information and explanations [sec.213(2)]
3. Right to receive notice of and attend general
meeting [sec.217(1)]
4. Right to make report at the general meeting [sec213(3)]
5. Right to be indemnified [Table-A com.Act]
 6. Right to take visit the branches[sec.214 (1)]
7. Right to take legal and technical advice [Ref.London
and general bank ,1895]
8. Right to sign the audit report [sec.215]
9. Right of lien

We are concerned here principally with those powers , rights

without Which it may not be possible for an auditor to
perform his duties honestly .
 RIGHT OF LIEN :
 The rights of lien of an auditor over the books which he
audited is a disputed one. In the case of “Herbert Alfred Burleigh
vs. Ingram clerk ltd (1901) ”. It was decided that the auditor had
no lien on the books of account in respect of the audit work. But if
the work was of the nature of accountancy lien could be exercised.
 In the case of “Chantrey martin and co. Vs martin ” (1953)
it was decided that the auditor has a lien on the working papers
prepared by him for the purpose of producing balance sheet . But
with regard to the correspondence between the accountant and
the Inland Revenue regarding taxation belonged to the client.
 From the above it can be appreciated that different views exist
with respect to the right of lien of auditors . It stands to reason that
the auditor may exercise right of lien if he renders service with
respect to the books of accounts over which he claims the right.
DUTIES OF AUDITOR :
 (a) Whether or not he has obtained all the information and
explanation which to the best of his knowledge and belief were
necessary for the purpose of his audit.
(b) Whether the profit or loss account exhibits a true and
fair view of the profit and which is referred to in his report.
(c) Whether in his opinion proper books of account are
required by law have been kept by the company and proper
returns and adequate information have been received from
branches not visited by him for the purpose of his audit.
 (d) Whether the Balance Sheet referred to his report is
properly drawn up in a true and fair way according to the best
information and explanation given to him as shown by the books of
account.
(e) Whether or not the balance sheet and Profit and Loss
accounts have been drawn up according to the requisitions of
Companies Act.
 Sec.213(2)
(a) Whether the loans and advances by the Company against
security are properly secured and that the terms of the loan and
advances are not against the interests of the Company or it’s
members.
(b) Whether loans and advances madly by the company have
been shown as deposits.
(c) Whether the personal expenses have been charged to
revenue account.
 The duty of an auditor is to assist the Inspectors in every
possible way when the affairs of the company are being
investigated. He can be asked to produce the workings paper for
the purposes.
 4. Duty to certify the statutory Report:

It is expressed in the Sec.213(4) that he has certify the

correctness of the statutory Report as for as:
(a) The number of shares which have been allocated by the
company whether against cash or other than cash.
(b) The total amount of cash received by the company in
respect of all the shares allocated.
 Company Act Schedule 3; part 2 mentions that, If an
existing company issues prospectus, it should contain a statement
of Profits and Losses shoeing the rate of dividends paid each year
of the previous 5 years and a statement of assets and liabilities of
the Company.
 STATUAS OF AN AUDITOR:

An auditor is appointed for a period of time in a company.

Now the question is whether an auditor is the agent of
shareholders or of the directors or he is an officer of the company;
just like secretary, manager, accountants etc.
Apparently it appears that he performs the functions of an agent
as well as that of an officer of the company. Several times the
court gives views about this matter.
Let us see what an auditor is……
1) Agent of shareholders :

Generally an auditor works as an agent of shareholders.

He is required to submit his report to the shareholders. It was
laid
Down by Lord Cranworth in his judgment given in the case of
Spakemen VS Evans that , “the auditor may be the agent of the
Shareholder as far as relates to the auditor of the accounts. For
this purpose of audit the auditor will bind the member.”

So we can say that an auditor is an agent of the

shareholders.
2) Officer of the company :

According to company act 1994, sec.2(1), officer means any

Directors, managing agent, manager or secretary. It is also said in
this section, an auditor can be consider as an officer only the
purpose of sec.331,332,333. without these sections an auditor is not
Given the status of an officer.
So according to law an auditor is an officer in narrow sense.
In the case London & General Bank (1895) & the Kingston
Cotton mills co ltd (1896) the auditor treated as an auditor.
On the other hand a provisional auditor can’t be considered
As an officer. Re: Closeton Countries Stream Breakers &
Milling ltd (1897).
3) Agent of management:

An auditor checks all the managing activities. So managing

Activities done properly. So we can consider an auditor as an agent
Of management.

At the end, we can say an auditor is not shareholders but he

Always try to keep the right of the shareholders.