13 December 2013
can the auditors remuneration be paid in the shares of the company when at the time of appointment and during the audit period the auditors does not hold any shares of the company and fulfills all the qualifications of the independent auditors.
Section 226(3) states that none of the following persons shall be qualified for appointment as auditor of a company:— (a) a body corporate; (b) an officer or employee of the company; (c) a person who is a partner, or who is in the employment, of an officer or employee of the company; (d) a person who is indebted to the company for an amount exceeding one thousand rupees, or who has given any guarantee or provided any security in connection with the indebtedness of any third person to the company for an amount exceeding one thousand rupees; (e) a person holding any security of that company after a period of one year from the date of commencement of the Companies (Amendment) Act, 2000 i.e. 13th December, 2000; (f) For the purposes of section 226, "security" means an instrument, which carries voting rights; (g) a person if he is, by virtue of section 226(3), disqualified for appointment as auditor of any other body corporate which is that company's subsidiary or holding company or subsidiary of that company's holding company. [Section 226(4)]
According to section 226(5), if an auditor becomes subject, after his appointment, to any of the is qualifications specified in sections 226(3) and 226(4), he shall be deemed to have vacated his office as such
Before appointment it was discussed with auditor about remuneration with Board and if auditor with subscribing shares then he will be disqualified for continue as auditor of the company.
So as and when he agree to take shares he will be disqualified for being continue as auditor of the company.
13 December 2013
only on agreement how can an auditor be disqualified when sec 226 clearly says that he will be disqualified when he holds any security of the co....here he is not holding at time of accepting the auditors position and hence sec 226 is not attracted in my view...
But if i as an auditor will discuss the terms and conditions of appointment with Board and if they suggest that they will issue shares against remuneration then i will object because i am very well aware of disqualification clause.
13 December 2013
yes i do agree this last view but legally speaking sec 226 does not play any role till the auditor holds any security of the co at or before conducting audit.
13 December 2013
Section 226 always should be remembered to auditor at the time of appointment, because before there appointment it will be discussed with Board.
15 December 2013
auditor wil disqualify because he ultimately have substantially interest within the company and will loose his independence If during audit, auditor wil loose independence thn what are the concequences??
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