Under section 224(8) of the Act, the remuneration of the auditors of a company is fixed:
(1) by the directors when auditors are appointed before the first annual general meeting by the directors or to fill a casual vacancy (other than one caused by the resignation of the auditor); (2) by the Central Government when the appointment is made by the same authority; (3) by the company in general meeting or in such manner as the company in general meeting may determine and (4) in the case of an auditor appointed under section 619 by the Comptroller and Auditor-General of India, shall be fixed by company in general meeting or in such manner as the company in general meeting may determine. For this purpose, the expression “remuneration” should be deemed to include any sums paid by the company in respect of auditor’s expenses. Students may note that the Act does not require that the remuneration should be fixed at the same meeting of the company at which the appointment is made. It may, therefore, be fixed at a subsequent meeting. Where a retiring auditor is re-appointed, his remuneration, in the absence of any resolution fixing a different remuneration, is considered to be the amount already fixed. Where, in addition to the normal audit, the auditor is also required to undertake the writing up of the books and to prepare annual accounts of the company or Income-tax or secretarial work, he is entitled to receive a remuneration in addition to the fees for audit. The additional remuneration is a matter of arrangement with the Directors. But any remuneration paid as fees, expenses or otherwise for such services must be disclosed in the
Profit and Loss Account :
- as auditor;
- as adviser, or in any other capacity in respect of :
- taxation matters;
- company law matters;
- management services; and
3. in any other manner.
The aforesaid manner of disclosure is required by Part II of Schedule VI to the Act. This has presumably arisen out of the recommendation of the Council of the Institute of Chartered Accountants of India in that regard. The Council recommended a more detailed disclosure to enable the readers of the annual statements of account to have this information more precisely and in greater detail.