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Appointment of Auditor under the Company Act, 2013

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Any company registered under the Company Act need to appoint an Auditor to comply with the provisions of the said Act. The company, whether registered as private limited, or one person company, or limited, or any other firm, are required to conduct the Audit. The purpose of Audit is to ensure financial compliance is being followed by all.

The section 139 states

“Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as prescribed”

Who can be Auditor?

A Chartered Accountant or a firm of qualified Chartered Accountant including LLP, can be appointed as the Auditor, If he satisfies the conditions for the same.

Tenure for the Auditor

The tenure for the Auditor is from the conclusion of the meeting in which appointment is proceeded till the 6th AGM. But, there is need for ratification of the said appointment in every Annual General Meeting held before.

Cooling Period

There is the provisions of cooling period, in case of Listed company or companies as prescribed. The period for which appointment can be made:

  • An Individual as auditor for more than one term of 5 consecutive years; and
  • An audit firm as an auditor for more than two terms of 5 consecutive years.

It is to be noted that the break in the term for a continuous period of 5 years will be considered as fulfillment of the above said condition of cooling period.

Appointment of 1st Auditor

The first auditor shall be appointed by the Board within 30 days from the date of Incorporation. In case of failure of Board to appoint, the EGM needs to be called for appointment within 90 days from the expiry of 30 days given to the Board. The tenure is till the first AGM.

Remuneration for Auditor

As per section 142(1), remuneration shall be fixed in its general meeting. But in the case of 1st Auditor appointed by the Board itself, the Board will decide the remuneration.

From ADT-01

Once the appointment is done, the form ADT-01 is needed to file file with ROC within 15 days from the appointment date. There is no requirement for filing the said form, in case of first auditor.

Procedure mentioned below is required for appointment of auditor

1. Intimate the proposed auditor regarding the intention of the company for appointing him as auditor.

2. Obtain consent & certificate about the eligibility for appointment.

3. In case, the audit committee is required to be constituted under section 177, then obtain its recommendation. Otherwise, the Board can proceed.

4. The Board can only recommend in the Board Meeting, unless, the appointment is for 1st Auditor.

5. On the basis of recommendation of the Board, the shareholders will appoint the Auditor in the Annual General Meeting.

4. Now, the company needs to intimate the auditor about the appointment and file the form ADT-1 with MCA within 15 days.

DEEPA KAINTURA