Page 220 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 10: Share Capital

(viii) Whether any director is disqualified from being appointment as director under s. 274(1) Notes
(g).
Where any of these matters enumerated from (i) to (v) is answered in the negative or with a
qualifi cation, the Auditor’s Report must state the reason for the answer. Such a report is called
the ‘qualifi ed report’.

Branch Audit

Section 228 states that the audit of a branch office of a company, if any, must be conducted by

the company’s auditors. However, in case the branch is situated outside India then the accounts

of the branch can be audited either by the company’s auditors or by a person qualified to act as
auditor according to the laws of that country.

Where the accounts of any branch office are audited by a person other than the company’s auditor,

the company’s auditor: (a) shall be entitled to visit the branch office, if he deems it necessary to do
so for the performance of his duties as auditor; and (b) shall have a right of access at all times to
the books and accounts and vouchers of the company maintained at the branch offi ce.

The branch auditor shall prepare a report on the accounts of the branch office examined by him
and forward the same to the company’s auditors who shall, in preparing the auditor’s report,
deal with the same in such manner as he considers necessary.
The branch auditor shall receive such remuneration and shall hold his appointment subject to
such terms and conditions as may be fi xed either by the company in general meeting or by the
Board of Directors if so authorised by the company in general meeting.

Special Audit

Section 233A empowers the Central Government to appoint auditors for conducting a Special
Audit. Where the Central Government is of opinion: (i) that the affairs of a company are not being
managed in accordance with sound business principles or prudent commercial practices; or (ii)
that the company is being managed in a manner likely to cause serious injury or damage to the
interests of the trade, industry or business to which it pertains; or (iii) that the financial position of

any company is such as to endanger its solvency; then the Central Government may at any time,
by order direct that a special audit of the company’s accounts for such period or periods as may

be specified in the order, shall be conducted by a chartered accountant specifically appointed by

the Government for the occasion, or it may be conducted by the company’s auditor.
The special auditor shall have the same powers and duties in relation to the special audit as an
auditor of a company has under s.227. However, he shall, instead of making his report to the
members of the company, make the same to the Central Government. The report of the special
auditor shall, as far as may be, include all the matters required to be included in an auditor’s
report under s.227 and if the Central Government so directs, shall also include a statement on any
other matter which may be referred to him by that Government.
The special auditor has to report to the Central Government and on receipt of the report, the
Government shall take such action as it may consider necessary. But if the Government does
not take any action on the report within four months from the date of its receipt, it shall send to
the company a copy of the report with its comments for circulating among the members of the
company.
The expenses of the special audit, as determined by the Government, shall be paid by the company.
Also the Central Government is empowered to direct any person specified in the order to furnish

to the special auditor within such time as may be specified in the order such information as may

be required by the special auditor. Default in compliance of the order is punishable with fi ne
upto ` 500.

LOVELY PROFESSIONAL UNIVERSITY 215