Page 106 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
20
"One of your friends is preparing for auditing & assurance exams of CA (Intermediate new) course. You
are already well versed with provisions of Companies Act, 2013. He seeks your help in better
understanding of provisions of section 139 of companies act, 2013 in light of certain practical issues and
concomitant matters as contained in Companies Act, 2013 regarding auditor’s appointment. Further, he
also provides you with text of Section 139 of companies Act, 2013 for ready reference and better
understanding as below: -
“139. (1) Subject to the provisions of this Chapter, every company shall, at the first annual general
meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that
meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every
sixth meeting and the manner and procedure of selection of auditors by the members of the company
at such meeting shall be such as may be prescribed:

Provided further that before such appointment is made, the written consent of the auditor to such
appointment, and a certificate from him or it that the appointment, if made, shall be in accordance with
the conditions as may be prescribed, shall be obtained from the auditor:
Provided also that the certificate shall also indicate whether the auditor satisfies the criteria provided
in section 141:
[Provided also that the company shall inform the auditor concerned of his or it’s appointment, and also
file a notice of such appointment with the Registrar within fifteen days of the meeting in which the
auditor is appointed.]
Explanation. —For the purposes of this Chapter, “appointment” includes reappointment.
(2) No listed company or a company belonging to such class or classes of companies as may be
prescribed, shall appoint or re-appoint—
(a) an individual as auditor for more than one term of five consecutive years; and
(b) an audit firm as auditor for more than two terms of five consecutive years:
[Provided that—(i) an individual auditor who has completed his term under clause (a) shall not be
eligible for re-appointment as auditor in the same company for five years from the completion of his
term;
(ii) an audit firm which has completed its term under clause (b), shall not be eligible for re-appointment
as auditor in the same company for five years from the completion of such term:
Provided further that as on the date of appointment no audit firm having a common partner or partners
to the other audit firm, whose tenure has expired in a company immediately preceding the financial
year, shall be appointed as auditor of the same company for a period of five years:
[Provided also that every company, existing on or before the commencement of this Act which is
required to comply with the provisions of this sub-section, shall comply with requirements of this
sub-section within a period which shall not be later than the date of the first annual general meeting of
the company held, within the period specified under sub-section (1) of section 96, after three years from
the date of commencement of this Act.]
the right of the company to remove an auditor or the right of the auditor to resign from such office of
the company.]
(3) Subject to the provisions of this Act, members of a company may resolve to provide that—
(a) in the audit firm appointed by it, the auditing partner and his team shall be rotated at such intervals
as may be resolved by members; or
(b) the audit shall be conducted by more than one auditor.
(4) The Central Government may, by rules, prescribe the manner in which the companies shall rotate
their auditors in pursuance of sub-section (2).
Explanation. —For the purposes of this Chapter, the word “firm” shall include a limited liability
partnership incorporated under the Limited Liability Partnership Act, 2008.
(5) Notwithstanding anything contained in sub-section (1), in the case of a Government company or any
other company owned or controlled, directly or indirectly, 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, the Comptroller and Auditor-General of India shall, in respect of a financial year, appoint
an auditor duly qualified to be appointed as an auditor of companies under this Act, within a period of
one hundred and eighty days from the commencement of the financial year, who shall hold office till
the conclusion of the annual general meeting.

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