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Auditing Theory

Notes A Government Company is defined in Section 617 as “any company in which not less than 51 per cent
of paid-up share capital is held by the Central Government or by any State Government or Governments or
partly by the Central Government and partly by one or more State Governments and includes a company
which is a subsidiary of a Governments Company as thus defined.”

Special Provisions

The special provisions of the Companies Act relating to Government Companies are as follows:
1. As regards audit
(a) The auditor of a Government Company shall be appointed or reappointed by the
Central Government on the advice of the Comptroller and Auditor-General of India,
provided that the auditor so appointed or reappointed does not hold appointment
as auditor in more than twenty companies, of which not more than ten could be
companies, with paid-up share capital of ` 25 lakhs or more. In the case of an audit
firm so appointed the ceiling of twenty companies shall be per partner of the firm.
The Auditor General will have the power to direct the company’s auditor relating to
the manner of audit and the performance of his duties. He shall also have the power
to conduct a supplementary test audit of the company’s account by persons appointed
by him; and
(b) The auditor is required to submit a copy of his audit report to the Comptroller and
Auditor General, who shall have the right to comment upon the report. Any such
comments shall be placed before the annual general meeting of the company along
with the audit report (Sec. 619 as amended by the Amendment Act, 1974). Thus, it
may be seen that the general provisions contained in Sees. 224 to 233 of the Act
relating to audit and appointment of auditors do not apply to a Government
Company.

2. As regards annual report
(a) Where the Central Government is a member of a Government Company, the Central
Government shall prepare an annual report on the working and affairs of the company
within three months of its annual general meeting before which the audit report is
placed. The annual report is to be laid before both houses of Parliament together
with a copy of the audit report and any comments thereupon, made by the
Comptroller and Auditor General of India [Sec. 619A(1)].
(b) Where in addition to the Central Government, any State Government is also a
member of a Government Company, that State Government shall place a copy of
the annual report (prepared by Central Government) together with a copy of the
audit report and the comments (referred to earlier) before the Houses or both Houses
of the State Legislature [Sec. 619A (2)3].
(c) Where the Central Government is not a member of a Government Company, every
State Government which is a member shall cause an annual report on the working
and affairs of the company to be prepared within the same time (as referred to
above), and then soon after lay it before the House or both Houses of the State
Legislature with a copy of the audit report and comments thereupon [Sec. 61 9 A (3)].
3. As regards the application of the Companies Act.
(a) A Government Company is to be registered under the Companies Act. It may be
incorporated as a ‘public’ or ‘private’ company. The Central Government may,
however, by notification in the Official Gazette, direct that any of the provisions of
this Act shall not apply to any Government Company or shall apply only with such
exceptions, modifications and adaptations, as may be specified in the notification.

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