Statutory Rights of an Auditor

Statutory Rights of an Auditor

The Companies Act confers extensive powers on the auditor. Since, he is the agent of the shareholders, he is having all the Rights, which other business owners shall generally have. Specific provisions are made in the Act and so the auditor cannot be prevented by anybody in the universe from the enjoyment of these rights. The following are the statutory rights of an auditor:

1. Right to Access to Books of Accounts

The auditor has a right of access to books of account, vouchers, and relevant documents of the company at all times during his term of office. Therefore, the auditor can even pay a surprise visit and check the entries in the books of accounts. But usually the auditor does not make such visits.

2. Right to Obtain Information and Explanations

The auditor has a right to obtain whatever information or explanation he requires in performing his duty. The person from whom the auditor requires such explanation must provide the same. The person may be the Managing Director, Director, Manager or any other officer or employee. If any information sought by the auditor is refused, he should report the matter to the members.

3. Right to make Suggestions to the Board

The auditor is also having a right to suggest suitable modifications in the method of accounting followed by the management. The directors, if a suggestion is made, should comply with it. If not, the auditor should report the same to the members. But he has no right to make any alteration in the accounts of the company on his own accord.

4. Right to Visit Branches

The auditor is also entitled to visit the branches of the company. However, if a qualified auditor audits the accounts of the branch, he can get copies of the accounts certified by the branch auditor, and always has access over such documents. The auditor has no statutory right to visit foreign branches.

5. Right to Receive Notice and Attend Meetings

The auditor has a right to receive all notices and communications relating to all general meetings during his term. Even if the accounts audited by him are not discussed, the company should send a notice to the auditor. The auditor is also entitled to attend the meetings. He can also speak at the meeting if any clarification is needed from him.

6. Right to Sign the Audit Report

Only the auditor can sign the Auditor’s Report. If a firm is appointed, any partner practicing in India can sign. The first auditor should sign and authenticate a particular part of the Statutory Report. Besides he has a right to sign and authenticate any other document, which the Act requires to furnish.

7. Right to Remuneration

He has a right to receive the remuneration fixed by the appointing authority. In the event of winding up, he can also rank as a creditor for the amount due. However, he can claim the amount only after completing the work fully and entirely.

8. Right to be Indemnified

The company under certain circumstances can take both civil and criminal proceedings against the auditor. If legal action is taken against him, he will generally defend himself against the proceedings. If the judgement goes to his favor or he is acquitted, the company should compensate the loss incurred by him in defending the suit.

9. Right to take Legal and Technical Advice

The auditor has a right to take advice or opinion of legal and technical experts if there is a need for it.

Infographic on Statutory Rights of an Auditor