Section 233 A empowers the Central Government, in certain cases, to call for a ‘special audit’. Such an audit may be required where the Central Government has reasons to believe:
- that the affairs of the company are not being managed on sound business principles or according to prudent commercial practices; or
- that the company is being managed in a manner likely to cause serious injury or damage to the interests of the trade, industry or business to which it pertains; or
- that the financial position of the company is such as might endanger its solvency.
Such an audit aims at providing the Government with a critical appreciation of the company and its financial position. The audit may be conducted either the company’s auditor or another chartered accountant who may or may not be engaged in a practice, appointed the Central Government [Sections 233(1) and (2)]. The auditor so appointed has the same powers and duties in the matter of special audit as the statutory auditor of a company has under section 227, except for the fact that he must report to the Central Government in place of the members of the company [Sub-section (3)]. The special auditor’s report must include, as far as may be practicable, all the matters required to be included in a normal auditor’s report under section 227 and where the Central Government so directs, also a statement on any matters which may be referred to him that Government [Sub-section (4)]. With a view to facilitating the work of the auditor the Central Government may serve an order to furnishto him all such information as he may be in need of non-compliance with such an order of the government shall render the defaulter punishable with a fine extending to Rs. 500 [Sub-section (5)]. On receipt of the report, the Central Government may take such action as circumstances might warrant, according to the provisions of the Act or any other law for the time being in force. In case the Central Government does not take any action within four months from the receipt of the report, it must send the report to the company either to circulate the copy or the extracts among the members or to get it read before the company at its next general meeting [Sub-section (6)]. The expenses of or incidental to a special audit, including the remuneration of the special auditor as fixed the Central Government (and its decision in this regard is final), must be paid the company. If the company defaults in making the payment, the amount can be recovered from the company as arrears of land revenue [Sub-section (6)].