(12.12.7) Special Audit

Section 233A empowers the Central Government to appoint auditors for conducting a Special Audit. Where the Central Government is of opinion: (i) that the affairs of a company are not being managed in accordance with sound business principles or prudent commercial practices; or (ii) 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 (iii) that the financial position of any company is such as to endanger its solvency; then the Central Government may at any time, by order direct that a special audit of the company's accounts for such period or periods as may be speiified in the order, shall be conducted by a chartered accountant specifically appointed by the Government for the occasion, or it may be conducted by the company's auditor.

The special auditor shall have the same powers and duties in relation to the special audit as an auditor of a company has under s.227.However, he shall, instead of making his report to the members of the company, make the same to the Central Government. The report of the special auditor shall, as far as may be,

include all the matters required to be included in an auditor's report under s.227 and if the Central Government so directs, shall also include a statement on any other matter which may be referred to him by that Government.

The special auditor has to report to the Central Government and on receipt of the report, the Government shall take such action as it may consider necessary. But if the Government does not take any action on the report within four months from the date of its receipt, it shall send to the company a copy of the report with its comments for circulating among the members of the company.

The expenses of the special audit as determined by the Government, shall be paid by the company. Also the Central Government is empowered to direct any person specified in the order to furnish to the special auditor within such time as maybe specified in the order such information as may be required by the special auditor. Default in compliance of the order is punishable with fine upto Rs 500.