Tuesday, 1 November 2011

Explain the qualification of an auditor of a limited company and how auditor is appointed and how auditor is removed

Companies ordinance throws light on the qualification of an auditor in the following words "A shall not be qualified for appointment as an auditor of a company unless he is a charted accountant."
Meaning of charted accountant are explained in the accountant ordinance.

The following persons can not be become the auditor of the company :

1. Any officer of employee of the company.

2. A body corporate.

3. A person who is a partner.

4. A director or a share holding more than 5% of the capital of a public company.

5. A partner of public company.

6. A person who is in debited to the company.

7. The spouse of director of the company.


1. Appointment Of First Auditor By Directors :-
a). First auditor is appointed by the directors with in sixty days of the date of incorporation of the company. Auditor will hold the office till the conclusion of the first annual general meeting.

b). If directors fail to appoint the auditor then company may appoint the first auditor in the general meeting.

2. Appointment By Shareholders :-
At each general meeting every company shall appoint an auditor to hold office from the conclusion of that general meeting until the conclusion of the next annual general meeting.

3. Appointment By Government :-
Government (Corporate Law Authority) appoints the auditor in the following cases :

1. If the directors fail to appoint the first auditor within sixty days.

2. Company also fails to appoint the first auditor 120 days after the date of incorporation.

3. If auditor is not willing to act as an auditor of the company.

4. Casual vacancy of auditor is not filled with in 30 days after the occurrence.

4. Appointment On Casual Vacancy :-
The auditor who is working dies or resign during his period of contract then directors may appoint the auditor until the next annual general meeting. Auditor will also hold the office till the next general meeting. If such vacancy continues the surviving auditor if any may act.

Appointment authority will fix the remuneration of the auditor :

1. If auditor is appointed by the company then company will fix it.

2. If auditor is appointed by the directors then they will fix it.

3. If corporate law authority has appointed the auditor then these will be fixed by them.

According the companies ordinance company is not entitled to remove the auditor before the completion of his term.

Note :-
Only first auditor appointed by the directors may be removed in the general meeting by the resolution. Fourteen days notice will be served to the retiring auditor for this purpose.


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