WHAT IS APPOINTMENT OF AUDITOR ?

A person who is a chartered accountant or a firm with a majority of partners practising in India can be appointed as the auditor of a company. A limited liability partnership can be appointed as the auditor of the company, but only chartered accountant partners will be authorised to act and sign on behalf of the firm.

Appointment of First Auditor of the company is done either in the first board meeting that has to take place within 30 days of incorporation, or if the appointment could not take place in the board meeting, then a general meeting needs to be held within 90 days of incorporation to hold office till the conclusion of the first AGM. Further, at the first annual general meeting, an auditor who shall hold office from the conclusion of that meeting until the conclusion of its sixth annual general meeting is appointed.

1. A corporate body other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008;
2. an officer or employee of the company;
3. A person who is a partner, or who is under the employment of an officer or employee of the company;
4. A person who, or his relative or partner is holding any security of or interest in or is indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of such amount as may be prescribed; or has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, for such amount as may be prescribed;
5. a person or a firm who, whether directly or indirectly, has a business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company of such nature as may be prescribed;
6. a person whose relative is a director or is in the employment of the company as a director or key managerial personnel;
7. a person who is in full-time employment elsewhere or a person or a partner of a firm holding an appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding an appointment as auditor of more than twenty companies;
8. a person who has been convicted by a court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction;
9. a person who, directly or indirectly, renders any service referred to in section 144 to the company, or its holding a company or its subsidiary company.

Yes, in case of casual vacancy auditor appointment can be done by the board of directors within thirty days only if casual vacancy is not a result of the resignation of an auditor. If that is the case, then the appointment will also have to be approved by the company at a general meeting held within three months of the board recommendation.

Yes, the auditor can be removed prior to the expiry of his term only via a special resolution of the company. This can only be done after securing prior written approval of the Central Government.

The first auditor of the company is appointed to hold office up to the conclusion of the first annual general meeting of the company as per section 139 (6) of the Companies Act.

No, it is not mandatory to file any form with the ROC on the appointment of the first auditor.

In case of a casual vacancy, the board of directors will make a recommendation in the board meeting within 30 days of the resignation. The recommendation requires the approval of the members within three months from the date of the board meeting.

No, the director does not have the power to remove the auditor.