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Penalties on Auditors under New Companies Act 2013 (Section 147)

Penalties on Auditors under New Companies Act 2013 (Section 147)

If the auditor has contravened any of his duties, he shall be punishable as below:

• required to refund the remuneration

• pay damages to the company, statutory bodies/authorities or any other person for losses arising as a result of incorrect or misleading statements in his audit report

• pay a fine which shall not be less than Rs 25,000 but which may extend to Rs 5 lakhs.

 Further, if the above contravention is with an intention to deceive the company or its shareholders or its creditors, tax authorities or any other person concerned or interested in the company, then he is also punishable with an imprisonment of a term which may extend up to one year and a minimum fine of Rs 1 lakh, which may extend to Rs 25 lakhs.

Where, in case of audit of a company being conducted by an audit firm, it is proved that the partner or partners of the audit firm has or have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to or by, the company or its directors or officers, the liability, whether civil or criminal as provided in this 2013 Act or in any other law for the time being in force, for such act shall be of the partner or partners of the audit firm and of the firm jointly and severally and such partner or partners of the audit firm shall also be punishable in the following manner:

• imprisonment for a term not less than six months and may extent up to ten years, provided that where the matter involves public interest, the minimum term will be three years; and

• fine for an amount ranging from one to three times the amount involved in the fraud

Similarly where a person has subscribed for securities of a company on any statement included, or the inclusion or omission of any matter, in the prospectus which is misleading and has sustained loss or damage as a consequence, the company and certain specified person (includes director, promoter and experts) are liable to pay compensation to every person who has sustained loss or damage. Experts may include auditors. Where it is proved that a prospectus has been issued with intent to defraud the applicants for the securities of a company or any other person or for any fraudulent purpose, every person referred to the above shall be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by any person who subscribed to the securities on the basis of such.

 

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This entry was posted in AUDIT.

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