According to section 139 of the Companies Act, 2013, every company must appoint an auditor at the first annual general meeting. Further, this auditor must hold office until the conclusion of the sixth annual general meeting. Thereafter, the company may retain the auditor or appoint another auditor who holds office until the sixth general meeting, and so forth. There are different situations under which a company might need to appoint an auditor. In this article, we will talk about the procedure for the appointment of auditor in different situations.
Procedure for appointment of Auditor under various situations
Situation 1: Appointment of First Auditor
We will look at two scenarios:
- Any company that is NOT a government company appointing the first auditor
- A Government Company appointing the first auditor
1. Any company that is NOT a government company appointing the first auditor
Who appoints the auditor?
- The Board of Directors within thirty days from the date of registration of the company.
OR
- The members of the company within ninety days at an extraordinary general meeting if the Board fails to appoint such an auditor within thirty days.
What is the tenure of the appointment?
The appointed auditor holds office until the conclusion of the first annual general meeting.
2. A Government Company appointing the first auditor
Who appoints the auditor?
- The Comptroller and Auditor-General of India within sixty days from the date of registration of the company.
OR
- The Board of Directors of the company within the next thirty days if the Comptroller and Auditor-General of India fail to appoint such an auditor within sixty days.
OR
- The members of the company within the next sixty days at an extraordinary general meeting if the Board fails to appoint such an auditor within the next thirty days.
What is the tenure of appointment?
The appointed auditor holds office until the conclusion of the first annual general meeting.
Situation 2: Appointment of Auditor at Annual General Meeting
We will look at two scenarios:
- Any company that is NOT a government company appointing the auditor
- A Government Company appointing the auditor
1. Any company that is NOT a government company appointing the auditor
Who appoints the auditor?
The members of the company.
What is the tenure of appointment?
The appointed auditor holds office from the conclusion of the first annual general meeting until the conclusion of the sixth annual general meeting and thereafter until the conclusion of every sixth meeting.
2. A Government Company appointing the auditor
Who appoints the auditor?
The Comptroller and Auditor-General of India within a period of one hundred and eighty days from the commencement of the financial year.
What is the tenure of appointment?
The appointed auditor holds office until the conclusion of the annual general meeting.
Situation 3: Appointment of Auditor in case of a Casual Vacancy
A casual vacancy means a vacancy due to the death, disqualification, or resignation of the auditor. We will look at two scenarios:
- Any company that is NOT a government company appointing the auditor in casual vacancy
- A Government Company appointing the auditor in casual vacancy
1. Any company that is NOT a government company appointing the auditor in casual vacancy
Who appoints the auditor?
The Board of Directors will fill the vacancy within thirty days. Also, if the vacancy is due to the resignation of the auditor then the approval at a general meeting is required to be taken within three months of the recommendation of the Board.
What is the tenure of appointment?
The appointed auditor holds office until the conclusion of the ensuing annual general meeting.
2. A Government Company appointing the auditor in casual vacancy
Who appoints the auditor?
- The Comptroller and Auditor-General of India fill the vacancy within thirty days.
OR
- The Board of Directors shall fill the vacancy within the next thirty days if the Comptroller and Auditor-General of India fail to fill the vacancy within thirty days.
What is the tenure of appointment?
The appointed auditor holds office until the conclusion of the ensuing annual general meeting.
Consent and Certificate from Auditor
According to Rule 4 of the Companies (Audit and Auditors) Rules, 2014, before appointing an auditor, the company must take consent in the prescribed format. The company also needs to take a certificate with the following disclosure:
- The firm or individual is eligible for an appointment. Further, he is not disqualified for appointment under the Chartered Accountants Act, 1949 (“Act”), and the rules and regulations thereunder.
- The proposed appointment is as per the terms of the Act.
- The proposed appointment is within the limits as laid down by the Act.
- If there are any proceedings against the auditor or audit firm, then they have disclosed the same in the certificate and that information is correct and true. Also, these proceedings include those pending with respect to professional matters of conduct.
Special Notice
According to section 115 of the Companies Act, 2013,
If,
The company wants to appoint a person other than the retiring auditor as the auditor
Or,
The company does not want to re-appoint the retiring auditor
Then,
It needs to pass a special resolution at the Annual General Meeting.
Circulation of the Notice
- Once the company receives the notice, it sends a copy of the same to the retiring auditor.
- On receipt of the notice, the retiring auditor has the right to make a representation to the company.
- He must ensure that the representation is not lengthy. Also, he must send it within a reasonable time.
- If the company receives the representation within the time-frame, then it must circulate the notice of resolution to all members along with the facts of the representation.
- If the company does not send out a copy of the representation along with the notice to its members, then it must read out the representation at the meeting.
Intimation to the RoC
Once a company appoints an auditor, it needs to send a notice to the RoC regarding the same. This is the process:
- Form: ADT 1
- Time for filing: 15 days from date of appointment
- Filing Authority: Registrar of Company
- Attachment:
-
- Resolution of Board Meeting or General Meeting
- Consent and Certificate as per Rule 3 of the Companies (Audit and Auditors) Rules, 2014
- Also, intimation by the Company for the appointment of Auditor
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Summing Up
This is the procedure for the appointment of auditors in various situations. We hope that the article was informative and helped clear your doubts. Also, while you are here, you might want to take a look at our Subscription Plans and let us know if we can be of any help.
