CS Executive: Company Law & Practice - Accounts & Auditors

Vocabulary practice flashcards covering appointment, disqualification, removal, powers, duties, CARO 2020, cost audit, and secretarial audit under Lesson 9 of CS Executive Company Law.

Small and Medium-Sized Company (SMC)

An unlisted company that is not a bank, financial institution, or insurance company, with turnover $\le ₹250\text{ crore}$ and borrowings $\le ₹50\text{ crore}$ in the preceding year, and is not a holding or subsidiary of a non-SMC.

First Auditor (Non-Government Company)

An auditor appointed by the Board of Directors within $30\text{ days}$ of registration, or by members at an Extraordinary General Meeting (EGM) within $90\text{ days}$ if the Board fails, holding office until the conclusion of the first AGM.

First Auditor (Government Company)

An auditor appointed by the Comptroller and Auditor General of India (CAG) within $60\text{ days}$ of registration, or by the Board within the next $30\text{ days}$, or by members at an EGM within $60\text{ days}$, holding office until the first AGM.

Subsequent Auditor (Government Company)

An auditor appointed by the CAG within $180\text{ days}$ from the commencement of the financial year, who holds office until the conclusion of the Annual General Meeting.

Form ADT-1

The statutory form filed by a company with the Registrar of Companies to provide intimation of an auditor's appointment within $15\text{ days}$ of the meeting.

Mandatory Rotation of Auditors

The statutory requirement under Section 139(2) limiting individual auditors to $1\text{ term}$ of $5\text{ consecutive years}$ and audit firms to $2\text{ terms}$ of $5\text{ consecutive years}$ ($10\text{ years}$), applicable to listed companies, unlisted public companies with paid-up capital $\ge ₹10\text{ crore}$, private companies with paid-up capital $\ge ₹50\text{ crore}$, and companies with borrowings/deposits $\ge ₹50\text{ crore}$.

Cooling-Off Period (Auditors)

A mandatory period of $5\text{ consecutive years}$ from the completion of an auditor's or audit firm's tenure during which the incoming auditor or any audit firm sharing common partners/networks cannot be appointed.

Casual Vacancy (Auditor)

An unexpected vacancy in the office of an auditor filled by the Board within $30\text{ days}$; if caused by resignation, it must additionally be approved by the company in a general meeting within $3\text{ months}$ of the Board's recommendation.

Special Notice under Section 140(4)

A statutory notice required from members to propose a resolution at an AGM to appoint an auditor other than the retiring auditor, or to provide that the retiring auditor shall not be re-appointed (unless maximum tenure under rotation has expired).

Form ADT-2

The application filed by a company with the Central Government within $30\text{ days}$ of a Board resolution seeking prior approval to remove an auditor before the expiry of their term under Section 140(1).

Form ADT-3

The statement of reasons and facts that a resigning auditor must file with the company and Registrar (and CAG for government companies) within $30\text{ days}$ of resignation.

Prohibited Services (Section 144)

Non-audit services that an auditor cannot provide directly or indirectly to the audited company, its holding, or subsidiary, including accounting/book-keeping, internal audit, financial information system design, actuarial, investment advisory, investment banking, outsourced financial, and management services.

Business Relationship Disqualification

A ground for auditor disqualification under Section 141(3) covering commercial transactions with the company, except permissible professional services and ordinary-course, arm's-length purchases of goods or services as a customer.

20-Company Audit Limit

The ceiling prohibiting a person from holding appointment as auditor in more than $20\text{ companies}$, excluding One Person Companies, dormant companies, small companies, and private companies with paid-up capital less than $₹100\text{ crore}$.

Section 140(5) Tribunal Order

An order by the NCLT directing the removal of an auditor who acted fraudulently or colluded in fraud, resulting in a $5\text{-year}$ disqualification from auditing any company and liability for prosecution under Section 447.

Section 143(1) Inquiries

Mandatory statutory inquiries an auditor must conduct into loans and advances, book entries, sale of investments below cost, loans shown as deposits, personal expenses charged to revenue, and cash allotment of shares.

CAG Supplementary Audit

An audit conducted by the CAG upon receiving the audit report of a government company, with any resulting comments or supplements submitted within $60\text{ days}$ and placed before the AGM.

CARO 2020

The Companies (Auditor's Report) Order, 2020, containing $21\text{ reporting clauses}$ applicable to audits of financial statements for financial years commencing on or after 1 April 2021, with exemptions for banking, insurance, Section 8, OPC, and small companies.

Form CRA-2

The form filed with the Central Government to intimate the appointment, removal, or filling of a casual vacancy of a cost auditor within $30\text{ days}$ of the Board meeting or $180\text{ days}$ of the financial year commencement, whichever is earlier.

Form CRA-3

The statutory cost audit report submitted by the cost auditor to the Board of Directors within $180\text{ days}$ of the closure of the financial year.

Form CRA-4

The form used by a company to furnish the cost audit report along with full explanation of reservations and qualifications to the Central Government in XBRL format within $30\text{ days}$ of receipt.

Secretarial Audit (Section 204)

A mandatory compliance audit conducted by a Company Secretary in practice for listed companies, public companies with paid-up capital $\ge ₹50\text{ crore}$ or turnover $\ge ₹250\text{ crore}$, and companies with bank/PFI borrowings $\ge ₹100\text{ crore}$.

Form MR-3

The prescribed Secretarial Audit Report issued by an independent Company Secretary in practice, which must be annexed to the Board's Report.

Peer Reviewed Company Secretary

A Company Secretary in practice holding a valid peer review certificate from ICSI, mandatory for undertaking secretarial audits of listed entities and material unlisted Indian subsidiaries under SEBI LODR Regulation 24A.

Annual Secretarial Compliance Report (ASCR)

A report issued by a Practicing Company Secretary evaluating compliance with SEBI regulations and circulars, required to be submitted to stock exchanges within $60\text{ days}$ of financial year end.