The following points must be considered while vouching the directors’ remuneration in case of a public company and private company which is a subsidiary of a public company –
- Examine the Entitlement: The directors are not automatically entitled to remuneration. It is paid either according to the term of articles of association or in accordance with a resolution of the general meeting.
- Examine Adherence to Legal Provisions: The auditor should examine adherence to relevant sections of the Act such as –
¾ Section 309(3) and (4) which deals with manner of payment of managerial remuneration.
¾ Section 309(2) which deals with payment of listing fees.
¾ Section 198 which has prescribed the overall limit to managerial remuneration.
¾ Schedule XIII to the Act that has laid down conditions for payment of remuneration for companies having profits those having no profits or inadequate profits and companies having negative effective capital.
¾ Section 310 which provides for increase in remuneration.