Every company, whether private or public, has to audit accounts of its affairs. All the actual information can be obtained from the audit of the accounts about income, achievement, objectives fulfillment and financial status of the company.
So auditor is in the most important position in a company. The company Act, 2063 Section 110-119 provides the provisions, regarding the appointment, removal and duties of an auditor every company must have an audit report by a registered auditor. He must have a certificate issued by the Department of Auditor General and renewal of every year. According to the company Act, 2063 section 110 (1) each company shall have to appoint an auditor in accordance with this Act to audit its accounts.
An auditor can be appointed in the following ways:
- By annual general meeting of shareholder: An auditor is appointed by the annual general meeting of shareholders of a public company for one year. It is possible to continue to make re-appointments in the same way.
- By the board of directors: The board of directors can appoint an auditor before the first annual general meeting of the company, but in the case of private company it will be in accordance with the memorandum and unanimous agreement. The auditor appointed by the board of directors shall remain until next annual general meeting is held.
- By the office of the registrar of company: According to the to the company Act, 2063 Section (113) the office of the registrar of the company many appoint an auditor in case the Annual General Meeting of the company fails to appoint an auditor, or the general meeting could not be held or the auditor appointed in accordance with this Act, is terminated for any reason the office of the registrar may appoint another auditor at the request of the Board of directors of the company.
Removal of an Auditor
The following modes of removal of an auditor in accordance with the Company Act and rule regarding company. According to the Company Act, 2063, Section (119) the auditor under this chapter shall not be remove before the completion of audit of any financial year for which he was appointed.
Not with standing anything contended in sub-section (1) of the section (119) the auditor may be remove to giving prior information to Nepal Charted Accountants Institute, an obtaining approval from the regulatory authority relating to the business of the company, if the exists of such authority and in the absence of such authority with approval of the office of the registrar by adopting the same procedure with which he was appointed.
- If such an auditor breaches the code of conduct of an auditor.
- If he acts against the interest of the company appointing him as an auditor or commits any acts against the law.
The auditor shall be given a reasonable opportunity to defense while removing him.
Rights and Powers of an Auditor
According to the Company Act, 2063 the following rights and powers are give to the auditor of a company:
- Right to ask for submission of books of account for auditing with the related officers of the company.
- Right to ask the directors and officers to give him explanation for his questions.
- Right to visit all the branches of the company, to check the account, books and documents for auditing.
- Right to request the board of directors to call a extra-ordinary general meeting of the company, if the board does not called the extra-ordinary general meeting according to the company Act. He ca can all the extra-ordinary general meeting with the help of the company registrar office and makes the share holders familiar with the real financial picture of the company.
- Right to seek legal and technical counseling from the experts.
- Right to remuneration for his services provided to the company
- Right to prepare and submit an audit report to concerned party freely.
Dissolution of the Company
Dissolution of the company means an ending or breaking the termination of legal existence and legal personality of company by closing it's transaction. The life and death of the company depends upon the law.
The dissolution of company, the process of collecting it's assets and distributing the liabilities among the creditors and shareholders in accordance with the company Act.
The general meeting of the shareholders or the office of the registrar of the company can dissolve a company in accordance with the Company Act, 2063.
- Modes of Winding up
Modes of winding up of a company are provided n the Company Act, 2063 (Section 126 to 137). They are as follows:
- Voluntary winding up (liquidation) of company: According to the company Act, 2063 section 126 (1) except in case where a company has become or insolvent under the law relating to insolvency. The shareholders may liquidate a company either by special resolution adopted in the general meeting or as a provided for in the memorandum of association or the unanimous agreement or Article Association for this purpose the general meeting may pass a special resolution in the following circumstances:
- If the determined time to run the company has already passed.
- If the company is unable to pass it's liabilities.
- If a company is at a loss or if it is not possible to run it continuously.
- Any other causes may lead to a shut down of the company
- The company shall submit to the office of the company registrar a copy of special resolution and written declaration made directors on voluntarily (winding up) in a period of 7 days adopting such a resolution.
- Winding up by the office of the registrar: According to the Company Act, 2063 (section 132 to 136) the office shall issue an order that the company has been dissolved in accordance with this Act.
In accordance with the Company Act, 2063
The office of the registrar may dissolved a company in the following circumstances:
- If the promoter of the company has applied to the office of the registrar to dissolved the company because it fails to commence the business of the company.
- If the company defaults to submit to the office of the registrar the details and defaults in paying fine under section 80, 81 or the financial years.
- If in the course of administration of the company the office of the registrar has reasonable ground to believe that the company is not carrying on business or is not operated in this situation the office of the registrar shall issue an order to dissolved the company in accordance with this Act.