Every company registered under the Companies Act, 2013 is required to prepare its books of accounts, papers and financial statement for every financial year and such books are required to be audited by statutory auditor appointed by the company for this purpose.The appointment of such auditors is governed under the provisions of section 139 of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014
APPOINTMENT OF STATUTORY AUDITOR
Pursuant to the provisions of section 139 of the Companies Act, 2013 the first auditor of the company shall be appointed by the board of directors within 30 days of incorporation of the Company or registration of the company.
In case of failure to appoint the auditor, the board of directors shall intimate the same to shareholders, who will then call an extra ordinary general meeting within 90 days from the date of receiving intimation from board and shall appoint the first auditor. Such auditor shall hold the office till the conclusion of first annual general meeting.
Further subsequent auditor will be appointed by the shareholders at the first annual general meeting and such auditor will hold the office for a period of 5 years.
The company shall also file a notice of such appointment in Form ADT-1 with Registrar within 15 days of such appointment.
APPOINTMENT OF STATUTORY AUDITOR IN CASE OF GOVERNMENT COMPANY
In case of the government company the first auditor shall be appointed by Controller and Auditor General of India within 60 days from the date of incorporation or registration of the company.
In case of failure to appoint the auditor, board of directors shall appoint the first auditor within next 30 days. If the board also fails to appoints within such 30 days, then they shall intimate to shareholders who will then call an extra ordinary general meeting within 60 days from the date of receiving intimation from board shall and appoint the first auditor.
Such auditor shall hold the office till the conclusion of first annual general meeting.
Further subsequent auditor will be appointed by the Controller and Auditor General of India within a period of 180 days from the commencement of financial year till the conclusion of annual general meeting.
APPOINTMENT OF STATUTORY AUDITOR IN CASE OF CASUAL VACANCY
Casual vacancy may arise on account of:
- Death of the Auditor
- Disqualification of the Auditor
- Resignation of the Auditor
Casual vacancy shall be filled by the board of directors within 30 days and if the casual vacancy is due to resignation, then it shall be filled by the board of directors and should be approved by shareholders within a period of 3 months.
TENURE OF AUDITOR
The following class of companies:
- All Listed companies
- All unlisted public companies having paid up share capital of Rs. 10 crore or more
- All private companies having paid up share capital of Rs. 50 crore or more
- All companies having paid up share capital below threshold limit mentioned in point (2) and (3), but having public borrowings or deposits of Rs. 50 crores or more
shall not appoint or re-appoint
(a) an individual as auditor for more than one term of five consecutive years and
(b) an audit firm as auditor for more than two terms of five consecutive years.
MANNER OF ROTATION OF AUDITOR
Where a company is required to constitute an Audit Committee, the board shall consider the recommendation of such committee, and in other case, the board shall itself consider the matter of rotation of auditors and make recommendation for appointment of the next auditor by the members in annual general meeting.
- In case of an auditor (whether an individual or audit firm) the period for which the individual or the firm has held office as auditor prior to the commencement of the Act shall be taken into account for calculating the period of 5 consecutive years or 10 consecutive years as the case may be.
- The incoming auditor or audit firm shall not be eligible if such auditor or audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms.
PROCEDURE FOR APPOINTMENT OF AUDITOR IN FIRST ANNUAL GENERAL MEETING
1. Obtain a written consent of the auditor for his appointment on or before the date of appointment.
2. Obtaining a certificate from the auditor stating:
- That the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made thereunder;
- That the proposed appointment is as per the term provided under the Act;
- That the proposed appointment is within the limits laid down by or under the authority of the Act.
- That the list of proceeding against the auditor or audit firm or any partner of the firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
3. Issuing notice of annual general meeting including the agenda for appointment of statutory auditor.
4. Appointment of auditor in annual general meeting by passing ordinary resolution.
5. Informing the auditor about his appointment in annual general meeting.
6. Filing notice of such appointment in Form ADT-1 with Registrar within 15 days of such appointment.
7. Such appointed auditor will hold the office from the conclusion of that meeting till the conclusion of 6th annual general meeting.
The author can also be reached at csneharedekar@gmail.com
Disclaimer: Please note that the above article is based on the interpretation of related laws, which may differ from person to person and is not legal advice.
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