AUDITOR:

Auditor is a representative of the shareholders who examines books of accounts of the company
and reports on truth fairness of financial statement.

The auditor is the person who is specially trained and professionally qualified in the field of
auditing.

APPOINTMENT OF THE AUDITOR:

Section 252 the company’s ordinance, contains provisions relating to appointment of the auditor.
In the light of these provisions appointment of the auditor is explained below:

1. AGM:
Company law requires that every company should appoint the auditor(s) at its AGM.
2. Term of Appointment :
The auditor should be appointed from the conclusion of AGM in which he is appointed to the
conclusion of next AGM.
3. Qualification Of An Auditor:
Section 254 states that the auditor of a public company or a private company which is the
subsidiary of a public company must be a chartered Accountant.

4. Appointment Of The First Auditor(S) :

Section 252 states that the first auditor of a company shell be appointed by the directors, by the
shareholders, or by corporate law authority to hold office until the conclusion of AGM.
i.By Directors: The first auditor shell be appointed by the directors within the sixty days of the
date of incorporation of the company.
ii.By Shareholders: If, the director do not appoint the auditor within sixty days as mentioned
above, shareholders can appoint the auditors within next sixty days.
iii.By The Corporate Law Authority: If the auditors are not appointed by the directors or by
shareholders, then after one hundred and twenty days SECP shell appoints the auditor(s).

5. Appointment Of The Subsequent Auditor(S):

The subsequent auditor of a company shell be appointed by the shareholders, or Law Authority.
 The Auditor(s) appointed shell hold office until the conclusion of next AGM. The company shell
within one week of Authority’s power to appoint the subsequent Auditor(s) becoming
exercisable, give notice of that fact to the Authority

i.By Shareholders: At every AGM the shareholder appoint the auditor(s).

ii.By The Corporate Law Authority: If shareholder fails to appoint the auditor(s) in AGM, then
SECP shell appoints the auditor(s).
6. Appointment To Fill Casual Vacancy:
A casual vacancy may occur in the office of an auditor e.g. due to the death of the auditor or
dissolution of audit firm or on account some other contingency.
i. By Director: Casual vacancy in the office of the auditor is filled by the directors.
ii.By The Corporate Law Authority: If the auditors are not appointed by the directors then after
thirty days SECP shell appoints the auditor(s).

QUALIFICATION AND DISQUALIFICATION OF THE AUDITOR:

Section 254 of the Companies Ordinance, states legal requirements regarding the qualification ad
Disqualification of auditors of companies are as follow:

 QUALIFICATIONS
i.Chartered Accountant :
The auditor of public company or any of its subsidiary company must be a “Chartered
Accountant “
ii.Cost And Management Accountant :
For a private company having paid up capital of Rupees Three million or more, in addition to a
Chartered Accountant, a cost and management accountant may also act as the auditor(s).

 DISQUALIFICATION
i.Who is Disqualified?
As per section 254 none of the following persons shell be appointed as auditor of the company,
namely;
a. A person who is, or at any time during the preceding three years was, a director, other
officer or employee of the company;
 b. A person who is a partner of, or in the employment of , a director , officer or employee of
the company;
c. The spouse of the director of the company;
d. A person who is indebted to the company; and
e. A body corporate
ii.Disqualifications Apply For Being Auditor of Subsidiary or Holding Company:
If a person is disqualified for appointment as auditor of the company, he shell also not be
qualified for appointment as auditor of a company which is that company’s subsidiary or holding
company.
iii.Disqualification After Appointment :
If, after his/her appointment an auditor becomes subject to any of the disqualifications, he/she
shall be deemed to have vacated his office as auditor with effect from the date on which he/she
becomes so disqualified.
iv.Penalty if Disqualified Act as The Auditor :
If a person is subject to the any of the disqualification as mentioned above and he acts as an
auditor, he/she shall liable to a fine which may extend to twenty-five thousand rupees.
v.Appointment of Disqualified is Void :
The appointment as auditor of a company of an unqualified person, or of a person who is subject
to any disqualification to act as such, shall be void.

REMUNERATION OF AUDITOR:

Whoever (directors, shareholders, and authority) appoints the auditor also fixes his
remuneration. The aggregate amount of auditor’s remuneration, showing separately the
remuneration for services rendered as auditors and the remuneration for the services rendered in
any other capacity shall be disclosed in the profit and loss account.

REMOVAL OF THE AUDITOR:

a. Removal of The First Auditor :

Shareholder in the general meeting may remove the first auditor and appoint other auditor(s)
nominated by other shareholders. Notice of such nomination must be given to shareholders to at
least fourteen days before the meeting.
b. Removal of The Subsequent Auditor :
An auditor appointed after the first one cannot be removed before the end of the next annual
meeting; and where in the AGM the retiring auditor is not being reappointed the following
procedure shall be followed:
1) Notice of The Proposal :
The member, who proposed the appointment of another auditor instead of the retiring one, must
give a notice of proposal to the company at least fourteen days before meeting.
2) Communication of The Notice :
The company communicates this notice to the retiring auditor and to the member at least seven
days before the AGM.
3) Publication in The News Papers :
The listed companies are also required to publish this notice in English and Urdu newspapers.
4) Representation by Retiring Auditor :
On the receipt of such notice the retiring auditor may make a written representation. The
company shall send a copy of the representation to every shareholder unless the representation is
received too late to do so.
5) Representation to be Read Out :
If the representation cannot be sent, the auditor may require that it shall be read out in the
meeting.
6) Abuse of Representation :
The representation shall not sent out and read out; if the registrar is satisfied that it involves
needless publicity of defamatory matter.
7) Intimation of Registrar
Every company shall, within fourteen days from the date of retirement, removal or otherwise
ceasing to hold office of an auditor, send intimation thereof to the registrar.

RIGHTS OF THE AUDITOR

The auditor have been given certain rights under the companies ordinance, for the performance
of their duties effectively, section 255 of the companies ordinance, lays down following legal
provision for the rights of an auditor:

1) Excess to Records
Every auditor(s) of a company has right of excess to the books, papers, accounts, and vouchers
of the company at any time.
2) To Hold Office
An auditor(s) once appointed holds office till the conclusion of next AGM.
3) Right of Information
Every auditor(s) is entitled to require from the company and the directors and the other officers
of the company such information and explanation as he thinks necessary for the performance of
his duties.
4) To Call for Further Information
The auditor(s) can demand any further information necessary for purpose of the audit.
5) Foreign Branches of Company
The auditor(s) has excess to all such books and papers as have been transmitted by a foreign
branch.
6) Attendance at General Meeting
The auditor(s) of a company’s entitled to attend and to be heard at any general meeting.
7) Right to Receive Notice :
The auditor(s) has the right to receive any communication relating to any general meeting under
section 50 and 255
8) Right or Representation
Both section 253 and 255 provide the auditor(s) the right of representation at the general meeting
of the company. Through this right the auditor can describe his position if any point is raised
about the audit(s).
9) To Take Expert Advise
The auditor(s) of a company may take expert advice in technical matters.

DUTIES OF THE AUDITOR

The duties of an auditor(s) of a company under the Companies Ordinance and will established
auditing practices maybe summarized as follows:

1) TO CERTIFY the STATUTORY REPORT:

It is the duty of first auditor to issue a certificate to be accompanied to the statutory report.
2) TO PREPARE REPORTS for PROSPECTUS:
Where a company is already carrying on its business offers shares its is the duty of the auditor to
issues a report for inclusion in the prospectus.
3) TO MAKE a REPORT to MEMBERS :
The auditor is bound to make a report on financial statements of the company
4) TO OBTAIN FULL INFORMATION :
The auditor is required to obtain all information necessary for the purposes of the audit
5) TO VERIFY the INFORMATION :
The auditor is required to verify the information obtain for the purpose of the audit
6) TO EXPRESS OPINION :
It is the duty of the auditor to express, in the prescribe form, his opinion on the financial
statement of the company.
7) TO ATTACH REFERENCES:
The auditor is bound to attach to the audit report any other report, stamen or remarks referred to
in the audit report
8) TO STATE” NEGATIVES” with FACTS :
Where the auditor expresses a qualified or negative opinion, he is required to state the reasons
and factual positions
9) TO STATE ADDITIONAL MATTERS :
The auditor shall state in his reports additional matter, if any, required by the government.
10) TO ATTEND AGM:
The auditor is entitled to attend the AGM of the company
11) TO ASSIST the INCEPTOR:
The auditor is bound to assist the inspector appointed by the authority to investigate the affairs of
the company.
12) TO PREPARE a REPORT for DECLARATION of SOLVENCY:
In case of voluntary vending up of the company, the auditor is required to make a report in
support of director’s declaration of solvency of the company.