Special audit is conducted at the order of the Central Government. Which section gives such powers?

 Options:

a) Section 233(A) b) Section 233A c) Section 242(A) d) Section 242A

The Correct Answer Is:

• c) Section 242(A)

The correct answer is c) Section 242(A). This section of the Companies Act provides the Central Government with the power to order a special audit when it deems necessary for the examination of a company’s books and accounts. Here’s a detailed explanation of why Section 242(A) is the correct provision, along with explanations for why the other options are not applicable:

c) Section 242(A):

Section 242(A) of the Companies Act grants the Central Government the authority to order a special audit when it believes that it is essential to scrutinize a company’s books and accounts. This section is pivotal for regulatory oversight and intervention when concerns arise regarding the financial affairs of a company.

The Central Government typically invokes this section when there are suspicions of financial irregularities, mismanagement, or any other circumstance that requires a closer examination of the company’s financial records.

The appointed auditor conducts a thorough audit and submits a report to the Central Government, which can then take necessary actions based on the findings. Section 242(A) serves as a critical tool for maintaining transparency and accountability within the corporate sector.

Now, let’s explore why the other options are not correct:

a) Section 233(A):

Section 233(A) does not grant powers related to special audits ordered by the Central Government. Section 233(A) of the Companies Act primarily deals with the appointment of registered valuers for valuation of assets, liabilities, or shares of a company. It pertains to valuation matters and is not connected to the authority to order special audits.

b) Section 233A:

Section 233A also does not provide powers for ordering special audits by the Central Government. This section deals with the appointment of cost auditors and the requirement for certain companies to conduct cost audits of their financial statements. The focus of Section 233A is on cost accounting and audit, and it does not pertain to the authorization of special audits.

d) Section 242A:

Section 242A is not relevant to the Central Government’s powers to order a special audit. This section deals with the powers and procedures related to the investigation of a company’s affairs by the Serious Fraud Investigation Office (SFIO).

The SFIO is a specialized agency responsible for probing white-collar crimes and financial frauds. While it relates to investigative measures, it is distinct from the authority to order a special audit, which is provided for under Section 242(A).

In conclusion, the correct section of the Companies Act that grants the Central Government the power to order a special audit is Section 242(A). This section is invoked when there are concerns or suspicions regarding a company’s financial affairs, and it allows the Central Government to appoint a special auditor to conduct a detailed examination of the company’s books and accounts.

The findings of the special audit can be used to take necessary actions to address financial irregularities and maintain the integrity and transparency of the corporate sector. The other sections mentioned (Sections 233(A), 233A, and 242A) have distinct purposes and are not related to the authority for ordering special audits by the Central Government.

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