Company Audit 3rd Class Sub Chapter 1 | CMA Inter Syllabus 2022 | CA Isha Agarwal
Navin Classes・2 minutes read
Isha Agarwal simplifies the Audit subject with engaging methods in the CMA Inter Audit class, covering various topics like auditor appointments, fraud reporting, and auditor removal processes. The text focuses on the importance of thorough financial statement analysis, internal controls, and the detailed procedures for reporting fraud to the Central Government.
Insights
- The initial appointment of auditors in companies, the process of filling casual vacancies in the Board of Directors, and the importance of timely reporting of fraudulent activities are crucial aspects discussed in the text, emphasizing the foundational steps and responsibilities of auditors in maintaining financial integrity and transparency.
- The text also delves into the significance of auditor rotation to prevent conflicts of interest, the stringent procedures involved in removing auditors before their term expires, and the severe penalties imposed by the National Company Law Tribunal (NCLT) for auditor fraud, highlighting the regulatory framework and consequences associated with ensuring ethical auditing practices.
Get key ideas from YouTube videos. It’s free
Recent questions
What is the role of an auditor?
An auditor is responsible for examining financial records.
How are auditors appointed in companies?
Auditors are appointed during company incorporation.
What is the significance of internal control in auditing?
Internal control ensures smooth business operations.
What are the consequences of failing to report fraud?
Failure to report fraud promptly results in penalties.
What is the process of auditor removal?
Auditor removal requires Central Government approval.
Related videos
Navin Classes
Company Audit 4th Class Sub Chapter 1 | CMA Inter Syllabus 2022 | CA Isha Agarwal
Ujjwal Sharma
CA INTER SEPT 2024 IMPORTANT QUESTIONS! Last 15 days MASTER STRATEGY for CA inter september 2024| CA
CA Intermediate by PW
Nature, Objective and Scope of Audit | Auditing and Ethics | CA Inter (GP-2) May 24 | Ankit Mundra
Accounting MasterClass
Auditing | Meaning | Scope | Objective | Limitations | Audit | Classification Part-1 | B.Com | BBA |
CA Rishabh Jain
Lecture 01 | CA Inter Audit Fastrack For Sept. 2024 Exam | SA 700 | #cainter
Summary
00:00
"Efficient Audit Mentor Simplifies Complex Topics"
- Isha Agarwal is the mentor for the subject Audit, aiming to simplify it with engaging methods and in less time.
- The CMA Inter Audit class covered various topics, starting with the orientation and then delving into the end of company audit in sub chapter one.
- The process of statutory appointment of an auditor was discussed, distinguishing between government and non-government companies.
- The first auditor of a company is appointed during its incorporation and conducts the initial audit.
- Specific timelines were outlined for the appointment of auditors in both government and non-government companies.
- The subsequent auditor selection process in a government company involves a detailed procedure and approval from shareholders.
- The text detailed the conditions and procedures for filling casual vacancies in the Board of Directors.
- The rights of an auditor were explained, including access to books of accounts, financial statements, and the authority to ask questions.
- The importance of a thorough analysis of financial statements by auditors to ensure accuracy and fairness was emphasized.
- The duty to report as an auditor involves ten crucial aspects, including providing information, maintaining proper books of accounts, and reporting observations related to accounts and financial statements.
16:21
Ensuring Financial Integrity Through Internal Controls
- Internal control is crucial for financial control, ensuring smooth business operations.
- Purchase rates, vendors, and quality checks are essential checkpoints for purchases.
- All entries must be authorized and approved to maintain financial integrity.
- Fraudulent activities, like misappropriation of funds, must be reported to the audit committee or BOD promptly.
- Reporting fraudulent activities to the Central Government is necessary if the amount exceeds Rs 1 crore.
- Timely reporting of fraud is crucial, with a 45-day window for responses from the audit committee or BOD.
- Failure to report fraud in a timely manner can result in penalties for auditors.
- The audit committee oversees the activities of the Board of Directors and aids in conducting audits.
- Auditors must report on dividend distribution, unclaimed dividends, provisions for losses, and pending litigations.
- Compliance with the directions of the Central Government and maintaining an audit trail are essential duties for auditors.
32:45
"Company Parts Ways, New Auditor Required"
- The company is parting ways with the auditor, requiring the appointment of a new auditor.
- The departure process involves saying goodbye with two or three wedges, with specific instructions to be provided later.
- The auditor, Daasi, informs Philips of her impending marriage, leading to her resignation.
- Daasi's resignation necessitates the filing of form ADT 3 with the Registrar of Companies (ROC) within 30 days.
- Failure to file within the stipulated time incurs a penalty starting at Rs 50,000, increasing daily until reaching Rs 2 lakhs.
- Daasi, overwhelmed by the paperwork, initially hesitates to resign but eventually submits her resignation.
- The rotation of auditors is mandated by the Companies Act to prevent familiarity or self-interest threats.
- The rotation clause dictates that an individual auditor can serve for five years, followed by a cooling period of five years.
- The rotation clause applies to large companies with substantial public interest, with exceptions for OPCs and small companies.
- Additional provisions under the Companies Act prevent the same network or associated firms from reappointing the auditor.
51:00
Auditor Change: Resignation vs. Rotation
- Two ways of auditor change: resignation and rotation.
- Resignation occurs when an auditor's term ends prematurely or if they are not executing their duties properly.
- Board of Directors (BOD) must justify removal of an auditor before passing a resolution.
- Central Government approval is required for auditor removal, ensuring proper justification.
- Shareholders must pass a special resolution for auditor removal, requiring majority votes.
- Forms ADT 1 to ADT 4 are used for auditor appointments and removals in non-government companies.
- Central Government approval is crucial due to the esteemed nature of the auditor's role.
- Removal before term expiry is a severe process, especially if the auditor is involved in fraud.
- National Company Law Tribunal (NCLT) handles cases of auditor fraud, imposing severe penalties.
- NCLT can swiftly remove an auditor, ban them for five years, and apply Section 447 penalties if fraud is proven.
01:17:00
"Essentials of Auditing: Reporting, Fraud, and Removal"
- The text discusses various aspects related to auditing, including loan deposits, personal expenses, stock market investments, and fraud reporting.
- It mentions the importance of checking loan deposits, distinguishing between liabilities and assets, and the source of money for investments.
- The text highlights the need to report material fraud to the Central Government, with specific criteria for reporting based on the Companies Act.
- It outlines the duties of auditors, including maintaining proper books of accounts, reporting adverse company functioning, and internal financial controls.
- The text delves into the process of reporting fraud, involving the audit committee, Board of Directors, and ultimately the Central Government.
- It explains the rotation of auditors, detailing the terms for individual auditors and audit firms, and the companies to which rotation applies.
- The text also covers the procedure for removing an auditor before the term expires, involving board resolutions, Central Government approval, and shareholder meetings.
- It emphasizes the importance of passing special resolutions and providing written representation letters in the process of removing an auditor.
- The text mentions upcoming tests and revisions, with a schedule for testing sub-chapters and ensuring understanding of audit concepts.
- It concludes with a discussion on doubts, test schedules, and academic queries, encouraging understanding and enjoyment of the audit subject.
