The appointments, audit fees, rights and duties of the auditor of a Government Company in India

It is clear, therefore, that the Comptroller and Auditor-General of India have got the right to give advice to the Government regarding the appointment of the auditor of a Government Company.

Thus, the Government is the appointing authority but practically, auditors are nominees of the Comptroller and Auditor-General of India. Further, under sec. 619(3), the Comptroller and Auditor-General of India has power to issue directions to the auditor of a Government Company with regard to any matter relating to his functions and also to conduct any supplementary or test audit through any person authorised by him in this behalf.

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The limits specified in Sub-Sec. (1-1B) and (1-C) of Sec. 224 shall also apply in relation to the appointment or reappointment of the auditors of the Government Companies.

It is to be noted that the overall responsibility of conducting audit, in respect of the following Corporations which are wholly owned and controlled by the Central Government, has been entrusted to the Comptroller and Auditor-General of India :

(i) Life Insurance Corporation of India.

(ii) General Insurance Corporation of India.

(iii) All the Nationalised Banks of India.

(iv) Industrial Finance Corporation.

(v) I. D. B. I.

(vi) I. C. I. C. I.

Fixation of Audit Fees:

There is no provision in Sec. 619 of the Companies Act, regarding the fixation of audit fees to be paid to the auditors of Government Companies. The remuneration of these auditors is solely decided by the Company Law Board on the basis of the recommendations made by the Board of Directors of the company and in the light of factual merits of each case.

To avoid complaint regarding the inadequacy of the remuneration, it has been considered necessary to issue guidelines for Government Companies regarding fixation of auditors’ remuneration which is determined in accordance with the norms specified therein and the necessary recommendation is sent to the Company Law Board for consideration as and when the occasion arises.

While recommending the remuneration of the auditors, the Board of Directors of the Company concerned should take a comparative view of the affairs of the company so as to assess whether there has been any significant growth in its activities since the preceding year.

Where, however, the same Tee has been continued to be paid to the auditors during the past few years, the comparative view of the activities may be taken into account since the period when the fees were last fixed or revised.

It is to be ensured that the remuneration proposed by the company is commensurate to the work done or to be done by the auditors and the increase in the fee is reasonable and fully justified.

The Department of Company Affairs has issued in 1984 a letter which it has been stated that while fixing the remuneration of auditors in Government companies, the factor of inflation should also be taken into account.

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