- Right of access to books, etc. – The auditor of a company, at all times, has the right of access to the books and accounts and voucher of the company whether kept at the head office or elsewhere and he is entitled to obtain from the officers of the company such information and explanations as he thinks necessary, for the performance of his duties as auditor [Section 227(1)]. It may be noted that according to section 2(30) of the Act, the term ‘officer’ includes any director, manager or secretary or any person in accordance with whose directions or instructions the Board of Directors or any one or more of the directors are accustomed to act. The expression, “But save in sections 477, 478, 539, 543, 545, 621, 625 and 633, the term ‘officer’ will not include an auditor”, has been dropped by the Companies (Amendment) Act, 2000. With this amendment, the definition of “officer” now does not include auditor for certain provisions of the Act. The phrase ‘books, accounts and vouchers’ includes all books which have any bearing, or are
likely to have any bearing on the accounts, whether these be the usual financial books or the statutory or statistical books; memoranda books, e.g., stock books, costing records and the like may also be inspected by the auditor. Similarly the term ‘voucher’ includes all or any of the correspondence which may in any way serve to vouch for the accuracy of the accounts. Thus, the right of access is not restricted to books of account alone and it is for the auditor to determine what record or document is necessary for the purpose of the audit. Further, the right of access is not limited to those books and records maintained at the registered or head office so that in the case of a company with branches, the right also extends to the branch records, if the auditor considers it necessary to have access thereto [Section 228(2)]. If in his opinion, proper returns adequate for the purpose of his audit have not been received from branches, not visited by the auditor, this must be stated in his report [Section 227(2)(bb)].
- Right to require information and explanation from officers – This right of the auditor to obtain from the officers of the company such information and explanations as he may think necessary for the performance of his duties as auditor is a wide and important power. In the absence of such power,
the auditor would not be able to obtain details of amount collected by the directors, etc. from any other company, firm or person as well as of any benefits in kind derived by the directors from the company, which may not be known from an examination of the books. It is for the auditor to decide
the matters in respect of which information and explanations are required by him. When the auditor is not provided the information required by him or is denied access to books, etc., his only remedy would be to report to the members that he could not obtain all the information and explanations he had required or considered necessary for the performance of his duties as auditors.
- Right to attend general meeting – The auditors of a company are entitled to attend any general meeting of the company (the right is not restricted to those at which the accounts audited by them are to be discussed); also to receive all the notices and other communications relating to the general meetings, which members are entitled to receive and to be heard at any general meeting in any part of the business of the meeting which concerns them as auditors (Section 231). The right of the auditor is to attend any general meeting and to be heard there is only permissive. It is not his duty to attend or to take part in the discussion, further such a right extends only to meeting of the members and not to the meeting of directors. As a rule, it is not necessary for the auditor to exercise his right save in exceptional circumstance, e.g., where he has reason to believe that the directors are concealing deliberately a serious state of affairs from the shareholders or are likely to misinterpret to them some remarks in the audit report. Likewise, it may be advisable for the auditor to attend the meeting with a view to bring to the notice of the shareholders any matter which has come to his knowledge subsequent to his signing the report and if it had been known to him at the time of writing his audit report, he would have drawn up the report differently; or where the accounts have been altered after the report was appended to the accounts. But it should be borne in mind that the auditor cannot escape responsibility for any omission in his report or any inaccuracy in the accounts merely by making an oral statement or giving explanation to members at the annual general meeting. His audit report by itself should be clear, unambiguous and complete.
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