3.20 Query
Appointment of Joint Auditors under Section 619(2) of the Companies Act, 1956 Whether the Company law Board can appoint two separate firms of Chartered Accountants as Joint Auditors for auditing the accounts of 7 branches of a Government Company under Section 619 (2) of the Companies Act, 1956, on a common remuneration fixed for both of them. Statement of facts
1. The A Corporation Ltd., is a Government Company with its management fully controlled by the Government of “X” State. It has under it 7 branches (industrial projects) with its Head Office at “Y”. Each of the branches and the Head Office maintains a set of accounts of its own. The Company follows its fiscal year ending on the 31st day of March.
2. As it is a Government Company the annual appointment of its auditors is made by the Company Law Board pursuant to Section 619 (2) of Companies Act, 1956.
3. Prior to the year 1969-1970 the accounts of the Head Office of the Company were being audited by one firm of Chartered Accountants while those of the 7 branches by another firm of Chartered Accountants who are legally termed as branch auditors.
4. For the year 1969-1970 the Company Law Board has appointed one firm of Chartered Accountants for studying the accounts of the Head Office on remuneration specifically fixed for them and 2 other firms of Chartered Accountants as joint auditors for auditing the accounts of the 7 branches with a common remuneration fixed for both of them.
Opinion August 27, 1971
The Committee has considered the provisions of Section 224 as well as 619 of the Companies Act, 1956, and the Committee considers that the appointment of the type described by the querist would not in any way be against the provisions of the said two Sections. The Committee may point out that the appointment of Joint Auditors for a particular ‘Unit’ is a well-established practice. Joint auditors are appointed for several companies in the private as well as the public sectors and no particular difficulty is found in practice in cases where Joint Auditors have been appointed. It is always possible to make suitable arrangements between the Joint Auditors so that they are able to discharge the functions as Joint Auditors properly and effectively. The Committee does not think that any special or insurmountable difficulties will arise in practise if two firms of auditors are appointed Joint Auditors for auditing the accounts of seven branches of a Government Company. It will be easy for the two Joint Auditors to divide the work between themselves on an equitable basis, so that both the firms have to put in almost equal amount of effort in the audit. The single figure of remuneration fixed for the two joint branch auditors also should not cause any difficulty. The language of the Company law Board’s letter of appointment indicates that the Joint Auditors are to divide the work as well as the remunerator equally. In the light of the above observation the Committee’s answer to the question posed by the querist would be in the affirmative. _______________________ |