Appointment of Auditor in the company

INTRODUCTION

  • Every company incorporated in India are required to appoint Statutory Auditor in the Company for the Audit & proper maintain of the Balance sheet, Profit & loss, Ledger, Cash flow Statement & financial Statement of the company.
  • Here we discuss the topic Appointment of Auditor in the company as per Companies Act, 2013 and there are the following ways are:-

  1. Appointment of Auditor by New Company (other than Government Company).
  2. Appointment of Auditor in first AGM other than Government Company.
  3. Special notice for Appointment of Auditor other than Government Company.
  4. Appointment of Auditor in Casual vacancy due to Resignation other than Government Company.
  5. Appointment of Auditor in Casual Vacancy other than resignation other than Government Company.
  6. Appointment of Auditor in Government Company.

APPOINTMENT OF AUDITOR BY NEW COMPANY

As per section 139 of companies act, 2013 the newly incorporated company other than the government company required to appoint statutory Auditor of the company within 30 days from the date of Incorporation or registration.

 

Procedure of Appointment of Auditor

Check Eligibility of Auditor

The company is required to check the following eligibility of proposed Statutory Auditor are:-

  • Only Individual Chartered Accountant or firm is eligible to appoint;
  • Majority of partner practising in India of a firm;
  • Only Chartered Accountant is an eligible sign or acts if LLP firm of auditor;
  • Not Disqualified under Section 141(3) (Disqualification of Auditor);
  • Take proper explanation certificate if any proceeding is pending against Auditor before ICAI or Competent authority or any Court;
  • The Individual or firm not disqualified under the Chartered Accountants Act, 1949.

Calling of Board Meeting

  • The authorised person sent advance 7 days notice to all director of the company for the appointment of Auditor;
  • The Board of Director needs to passed Board Resolution (Majority of Director vote in Favor) to appoint an auditor.
  • The company shall file the Eform ADT-1 with ROCs with relevant fees within 15 days of passing of Board resolution along with consent letter and appointment of an auditor.

Inform to the member (BODs fail to appoint)

  • If the BODs (Board of Director) fail to appoint the auditor in board meeting than Directors are required to intimate to the members.
  • The company members are required to appoint an auditor within 90 days by calling EGM (Extraordinary general meeting).

Calling of EGM

  • The authorised person sent advance 21 days clear days notice to members of the company along with agenda.
  • The members of the company required to passed Ordinary resolution (Majority of members vote in favour) to appoint the auditor of the company.

Intimation to ROCs

  • The company required to intimate ROCs through Eform ADT-1 within 15 days from the date of passing of Ordinary resolution.
  • The following documents attached with Eform ADT-1 are:-

  1. Notice of EGM;
  2. Agenda of EGM;
  3. CTC (Certified True Copy) of the resolution;
  4. Consent letter of Auditor along with personal & qualification details;
  5. Appointment letter of Auditor.

Tenure of AuditorThe auditor appoints in a newly incorporated company shall hold office up to the conclusion of 1st AGM (Annual general meeting).

 

APPOINTMENT OF AUDITOR IN FIRST AGM OTHER THAN GOVERNMENT COMPANY

The subsequent Auditor of the company appointed or ratification of the appointment in the first AGM of members by passing an ordinary resolution.

 

Procedure of Appointment of Auditor

Check Eligibility of Auditor

  • The company is required to check the following eligibility of proposed Auditor are:-
  • Only Chartered Accountant Individual or firm is eligible to appoint;

  1. Majority of partner practising in India of a firm;
  2. Only Chartered Accountant is an eligible sign or acts if LLP firm of auditor;
  3. Not Disqualified under Section 141(3) (Disqualification of Auditor);
  4. Take proper explanation certificate if any proceeding is pending against Auditor before ICAI or Competent authority or any Court;
  5. The Individual or firm not disqualified under the Chartered Accountants Act, 1949.

Calling of Board Meeting

  • The authorised person sent advance 7 days notice to all director of the company to call AGM for the appointment of Auditor or discuss other motion mention in the agenda.;
  • The Board of Director passed Board Resolution (Majority of Director vote in Favor) to call AGM.
  • The company sent advance 21 clear days notice to all the members along with agenda or resolution required to be discussed in the AGM.

Calling of AGM

  • The members of the company required to passed Ordinary resolution (Majority of members vote in favour) to appoint the subsequent auditor of the company.
  • If the company is required to constitute the audit committee than the name of the auditor is recommended by the committee to BODs.
  • If the member wants the first auditor of the company to continue as the auditor than the ratification of his appointment by passing Ordinary resolution but

  1. He is not disqualified for re-appointment or
  2. He has not given notice or willingness for reappointment or
  3. No Special resolution passed in the meeting to appoint some other Auditor or expressly providing he shall not be reappointed.

Filing to ROCs

  • The company required to intimate ROCs through Eform ADT-1 within 15 days from the date of passing of Ordinary resolution.
  • The following documents attached with Eform ADT-1 are:-

  1. Notice of AGM;
  2. Agenda of AGM;
  3. CTC (Certified True Copy) of the resolution;
  4. Consent letter of Auditor along with personal & qualification details;
  5. Appointment letter of Auditor.

Tenure of Auditor

The auditor appoints in an AGM shall hold office up to the conclusion of 6th AGM (Annual general meeting) or 5 years.

 

SPECIAL NOTICE FOR APPOINTMENT OF AUDITOR OTHER THAN GOVERNMENT COMPANY

  • The shareholders of the company have a right to appoint an auditor in place of retiring auditor or don’t want to reappoint the retiring auditor by sending special notice as per section 115 of companies act, 2013.
  • The Special notice not sent for the retiring auditor who has completed the term of 5/10 years as per section 139(2) of the companies act, 2013.

Calling of General Meeting of Shareholders

  • The 21 clear days advance notice sent to all shareholders of the company along with Motion (all the resolution before passing are motion) with explanatory statement & any other agenda.
  • The date of dispatching, Receiving of notice & date of meeting excluded from the 21 days clear notice.

Special Notice by shareholders.

  • The shareholder required to sent special notice to the company if they don’t want to reappoint retiring auditor or appoint another Auditor in place of retiring auditor.
  • The special notice sent to the company at least 14 days before the date of the General Meeting of shareholders.
  • The Special notice is signed & sent by members holding not less than 1% of the total voting power or holding shares on which such aggregate sum not exceeding five lakh rupees.

Intimate to Concerned Auditor

  • The company intimate to the concerned Auditor for which special notice is sent by the shareholders.
  • The concerned Auditor has a right to heard the resolution to be pass in the general meeting of shareholders.

Representation by Concerned Auditor

  • The concerned Auditor sent representation to the company in respect of resolution for his removal.
  • The copy of representation sent by the company to every shareholder who entitled to attend the meeting.
  • If a company not able to sent the representation to the shareholders than representation is orally read in front of all the shareholders.

Passing of resolution

  • The shareholders of the company have the power to remove an Auditor from the company.
  • The representation of concerned Auditor is read in front of all the shareholders if representation not sent along with the Notice of General Meeting.
  • If the company think the representation is against the interest of shareholders then company not required to read representation of removing Auditor after getting approval from the NCLT.
  • The resolution moved towards the shareholders to discuss and pass the ordinary resolution to remove an Auditor from the company.
  • Ordinary resolution means more than 50% of shareholder present in the meeting vote in favour of the resolution.

Intimation to ROCs by company

  • The company needed to file Eform ADT -1 with ROCs within 15 days of passing of a resolution for removal of Auditor along with following documents are:-

  1. Notice sent to shareholder along with explanatory statement;
  2. Special Notice of Shareholders;
  3. Representation of concerned Auditor;
  4. Appointment letter of Auditor appointed in the meeting (if any);
  5. CTC (certified true copy) of a resolution passed by shareholders.

Tenure of Auditor

The auditor appoints in an AGM shall hold office up to the conclusion of 6th AGM (Annual general meeting) or 5 years.

 

APPOINTMENT OF AUDITOR IN CASUAL VACANCY DUE TO RESIGNATION

Non-government company

As per the provisions of companies act, 2013 if the casual vacancy of an auditor arises in the company due to resignation by existing Auditor then its responsibility of members or shareholders to fill the casual vacancy within 3 months from the date of recommendation given by Board of Directors.

 

Tenure of Auditor

The auditor of the company holds his position up to the conclusion of next AGM of the company.

Government Company

The CAG (Comptroller Auditor General of India) will appoint a new auditor of the company within 30 days from the date of resignation of Auditor.

 

Tenure of Auditor

The newly appointed auditor of the company holds his office up to the conclusion of next AGM of the company.

 

APPOINTMENT OF AUDITOR IN CASUAL VACANCY

(OTHER THAN RESIGNATION)

 

Non-government company

If the casual vacancy of an auditor arises in the company any reason other than resignation by existing Auditor then its responsibility of the Board of Directors to fill the casual vacancy within 30 days of such casual vacancy.

 

Tenure of Auditor

The auditor of the company holds his position up to the conclusion of next AGM of the company.

 

Government Company

The Board of Directors shall appoint a new auditor of the company within 30 days from the date of resignation of Auditor.

 

Tenure of Auditor

The newly appointed auditor of the company holds his office up to the conclusion of next AGM of the company.

 

APPOINTMENT OF AUDITOR IN GOVERNMENT COMPANY

As per section 139 (5), (7), (8), (11) of the companies act 2013 the appointment of auditor by CAG or members or Board of Directors in government company or company which directly or indirectly controlled by the government.

 

Appointment of Auditor in newly incorporated

 

  • CAG (Comptroller & Auditor General) appoint the new auditor within 60 days of registration of the company if CAG is failed to do so then
  • The Board of Directors has the right to appoint a new auditor within 30 days of CAG failure and intimate to company members if BODs are not able to appoint an auditor.
  • The company members call EGM to appoint a new auditor by passing Ordinary resolution within 60 days of information provided by BODs.

Intimation to ROCs by company

The company needed to file Eform ADT -1 with ROCs within 15 days of passing of an Ordinary resolution along with following documents are:-

  1. Notice sent to shareholder along with explanatory statement;
  2. Appointment letter of Auditor appointed in the meeting;
  3. Consent letter of Auditor;
  4. CTC (certified true copy) of a resolution passed by shareholders or BODs.

Tenure of Auditor

The auditor appoints in a newly incorporated government company shall hold office up to the conclusion of 1st AGM (Annual general meeting).

 

Appointment of Auditor in First or Subsequent AGM

The Appointment of an auditor in First AGM or subsequent auditor always appointed by CAG (Comptroller & Auditor General) within 180 days from the 1st April of the Financial year.

Intimation to ROCs by company

The company Intimate ROCs through Eform ADT -1 within 15 days of Auditor appointment by CAG along with following documents are:-

  1. Appointment letter of Auditor appointed in the meeting;
  2. Consent letter of Auditor.

Tenure of Auditor

The auditor appointed by CAG will hold office up to the conclusion of 6th AGM (Annual general meeting) or 5 years.

MANDATORY ROTATION OF AUDITOR

  • As per section 139(2) & Rule 5 of Companies act, 2013 introduced the concept of rotation of an Auditor and its application to the following companies are:-

  1. All Listed Companies;
  2. All unlisted public companies having paid-up capital Rs. 10 cr. or more;
  3. All private limited companies having paid-up share capital of rupees 50 crores or more;
  4. All listed and unlisted public companies public borrowing Rs. 50 cr. or more from any Financial Institution or Public deposit.

  • The provisions of mandatory rotation of Auditor shall not be applied to the following companies are:-

  1. Small companies and
  2. One Person Company.

Individual Auditor

  • The company shall not appoint or re-appoint an individual auditor for the more than 5 consecutive years or 1 term of 5 years.
  • The cooling period of 5 years required to appoint or re-appoint audit who completed the term of 5 years.

Audit Firm

  • The Auditor firm is appointed or re-appointed for the maximum tenure of 2 consecutive terms of 5 years or 10 years.
  • The Auditor firm required the cooling period of 5 years to appoint or re-appoint audit who completed the term of 10 years.
  • In the case of Auditor firm, the audit is conducted by a minimum of two auditors.
  • If two or more audit firms or LLP have a common partner(s) and one of these audit firms or LLP has completed its 2 terms of 5 consecutive years then none of such firms shall not eligible for re-appointment as auditor in the same company for 5 years.
  • No audit firm or LLP shall not be appointed if common partners in firm whose tenure of 2 terms of 5 years are expired in preceding Financial Year.
  • The above provision shall affect the right of the company to remove auditor or right of Auditor to give resignation.
 
 
 

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