What is the status of the auditor in a company?
The status or position of an auditor under the following heads:
As an agent of the company:
An agent is a person who is employed to do an act, for another or to represent other in dealings with the third person. Sometimes, an auditor has to act as a representative of the company for which he has been appointed as an auditor. As per the provisions of Section 230(b) if the company asks for investigation, He has to act as an agent of the company.
An auditor is appointed by the shareholders of the company in the annual general meeting (except when he is appointed by the Board of Directors of the company in a newly established company).
The shareholders of the company have to depend on the good faith and efficiency of the auditor appointed to check the accounts and report on the Profit and Loss account and Balance Sheet of the company. He is appointed to safeguard the interest of the shareholders. An agent principal relationship is established between the auditor and the shareholders.
As an officer of the company:
An officer means any person who is regularly employed as part of his business or occupation in conducting the affairs of the company. According to Section 2(30) of the Indian Companies Act, a company’s auditor is supposed to be an officer of the company.
As per Section 477 he can summon the persons suspected of having the property of the company in the case of winding up of the company.
Section 478 empowers an auditor to order public examination of the promoters, directors etc. who are guilty of fraud.
Section 539 gives the power to the auditor to recommend the penalties for the falsification of accounts book.
Section 543 deals with the power of the court to assess damages against delinquent directors and officers of the company and to compel the payment.
Section 545 is concerned with prosecution of delinquent officers and members of the company.
Section 621 lays down that offenses against this act will be cognizable only on complaint by Registrar, shareholders or government.
According to Section 633, he has the power of the court to grant relief in certain cases i.e. in proceedings for negligence, default, breach of duty, misfeasance etc.
As an employee of the company:
An employee works under a contract of service with his employer, who has the power not only to direct what work the employee has to do, but also the manner in which the work has to be done. An auditor is the employee of the company as he is paid for the job performed by him for the company. His position is a little different from the employees of the company. He cannot be called as the servant of the directors of the company, rather he is appointed to check the work of the directors.