Documents to be Verified in Vouching of Directors Remuneration
An auditor should verify the following documents while vouching directors remuneration.
1. The agreements with managing directors.
2. The approval of Central government, if required.
3. The Articles of Association.
4. Minutes of board of directors and shareholders’ meetings relating to appointment / reappointment of directors.
5. Receipts obtained from the managing directors acknowledging the remuneration received.
Role of an Auditor in vouching of Directors Remuneration
1. The auditor should verify that the appointment/Reappointment of directors and that the remuneration is as per the requirements of the Companies Act.
2. He should also verify the Articles of Association and resolutions of the Board and the general body meeting to ensure that the appointment is made not in contravention to Companies Act and Articles of Association of the company.
3. He should verify the calculation of the remuneration and ensure that it does not exceed the maximum limits prescribed by the Companies Act.
4. The auditor should verify the deductions made from the remuneration regarding Provident Fund, Income Tax, Profession Tax, etc.
5. The auditor should ensure that the value of perquisites provided to the managing director is included in his remuneration and he should verify the value of perquisites with the support documents.
The auditor should ensure that the manager’s remuneration is shown as a separate item in the profit and loss account and not included in the salaries account.