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Sec227 - Powers and duties of auditors.
(1) EveryAuditor of a company shall have a right of access at all times to the books andaccounts and vouchers of the company, whether kept at the head office of thecompany or elsewhere, and shall be entitled to require from the officers of thecompany such information and explanations as the auditor may think necessary forthe performance of his duties as auditor.
(1A) Withoutprejudice to the provisions of sub-section (1), the auditor shall inquire:
(a) Whether loans and advances made by the company on the basis ofsecurity have been properly secured and whether the terms on which they havebeen made are not prejudicial to the interests of the company or its members.
(b) Whethertransactions of the company which are represented merely by book entries are notprejudicial to the interests of the company.
(c) Where the companyis not an investment company within the meaning of Section 372 or a bankingcompany, whether so much of the assets of the company as consist of shares,debentures and other securities have been sold at a price less than that atwhich they were purchased by the company.
(d) Whether loans and advancesmade by the company have been shown as deposits.
(e) Whether personal expenseshave been charged to revenue account.
(f) Where it is stated in the booksand papers of the company that any shares have been allotted for cash, whethercash has actually been received in respect of such allotment, and if no cash hasactually been so received, whether the position as stated in the account booksand the Balance Sheet is correct, regular and not misleading.
(2) The auditor shall make a report to the membersof the company on the accounts examined by him, and on every Balance Sheet andProfit and Loss Account and on every other document declared by this Act to bepart of or annexed to the Balance Sheet or Profit and Loss Account,which are laid before the company in general meeting during his tenure ofoffice, and the report shall state whether, in his opinion and to the best ofhis information and according to the explanations given to him, the saidaccounts give the information required by this Act in the manner so required andgive a true and fair view :
(i) In the case of the balance-sheet, of the state of the companys affairs asat the end of its financial year and
(ii) In the case of the profit and loss account, of the profit or loss for itsfinancial year.
(3) The auditors report shall alsostate :
(a) Whether he has obtained all the information and explanations which to thebest of his knowledge and belief were necessary for the purposes of his audit.
(b) Whether, in his opinion, proper books of account as required by law havebeen kept by the company so far as appears from his examination of those books,and proper returns adequate for the purposes of his audit have been receivedfrom branches not visited by him.
(bb) whether the report on the accounts of any branch office audited undersection 228 by a person other than the companys auditor has been forwarded tohim as required by clause (c) of sub-section (3) of that section and how he hasdealt with the same in preparing the auditors report.
(c) whether the companys balance sheet and profit and loss account dealt withby the report are in agreement with the books of account and returns.
(4) Where any of the mattersreferred to in clauses (i) and (ii) of sub-section (2) or in clauses (a), (b),(bb) and (c) of sub-section (3) is answered in the negative or with aqualification, the auditors report shall state the reason for the answer.
(4A) The Central Government may,by general or special order, direct that, in the case of such class ordescription of companies as may be specified in the order, the auditors reportshall also include a statement on such matters as may be specified therein :
Provided that before making any such order the Central Government may consultthe Institute of Chartered Accountants of India constituted under the CharteredAccountants Act, 1949, in regard to the class or description of companies andother ancillary matters proposed to be specified therein unless the Governmentdecided that such consultation is not necessary or expedient in thecircumstances of the case.
(5) The accounts of a company shallnot be deemed as not having been, and the auditors report shall not state thatthose accounts have not been, properly drawn up on the ground merely that thecompany has not disclosed certain matters if :
(a)those matters are such as the company is not required to disclose by virtue ofany provisions contained in this or any other Act, and
(b) those provisions are specified in the balance sheet and profit and lossaccount of the company.
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