Company Audit and Statutory Framework under the Companies Act
Domain 6 tests the Companies Act 2013 framework for appointment, eligibility, duties, reporting and fraud reporting.
Core rules
- Section 139: auditor appointed at AGM for five years; rotation applies to prescribed classes of companies.
- Section 141: disqualifications include indebtedness above ₹5 lakh, business relationships, and specified relatives holding directorships.
- Section 144: prohibited non-audit services include internal audit, design of financial information systems, actuarial and investment advisory services.
- Section 143(12): fraud reporting to the Board or audit committee; Rule 13 requires reporting within two days, and if no action, to the Secretary, MCA within 45 days.
- CARO 2020 and IFC reporting under Section 143(3)(i) apply as applicable.
Worked example
An auditor resigns before completing the term. The company must file Form ADT-3 with the ROC and the Central Government within 30 days of resignation. The Board must appoint a replacement within 30 days; if it fails, the Central Government may appoint. Late or missing ADT-3 is a compliance trap.
Traps
Assuming rotation applies to every company; counting OPCs, dormant and small companies in the 20-company ceiling; accepting a prohibited service; and failing to escalate a fraud after the audit committee does not act.