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Appointment of first auditor

Mohammad Afroz Ahmed (Article student) (51 Points)

14 August 2009

Hi,

Pls answer the following query:

If the first auditor is not appointed within one month of obtaining certificate of incorporation, can the company appoint him before the First AGM through an EGM?

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17 Replies

Pavan Jain S (Chartered Accountant) (1575 Points)
Replied 15 August 2009

Very much... You can appoint first auditor through an EGM

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P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 17 August 2009

Yes, EGM can appoint, as specifically permitted in Proviso (b) to Sec.224(5).

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 17 August 2009

Hi,

Please find below the relevant provisions regarding appointment of first auditor.

Appointment of first auditors

As per section 224(5), the first auditor or auditors of a company shall be appointed by the Board of directors within one month of the date of registration of the company; and the auditor or auditors so appointed shall hold office until the conclusion of the first annual general meeting. Following provisions are related to the matter:

(i) Appointment of first auditors in general meeting.—A company in general meeting may appoint the first auditor or auditors if the Board of directors fails to exercise its power of appointment of first auditors within one month of the date of incorporation of the company.

(ii) Appointment of first auditors through Memorandum and Articles of Association.—The Institute of Chartered Accountants of India has expressed its opinion vide Compendium of Opinion Volume No. 1 that the appointment of first auditors through the Memorandum and Articles of Association of the newly floated private company is not a valid appointment.

(iii) Removal of first auditors.—The company may, at a general meeting, remove first auditor(s) or all or any of such auditors and appoint in his or their places any other person or persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than fourteen days before the date of the meeting.

(iv) Tenure of office of the first auditor.—The first auditor(s) shall hold office until the conclusion of the first annual general meeting of the company and then be eligible for re-appointment.

Best Regards

Saranya (Trainee) (39 Points)
Replied 07 October 2010

Will the Directors be disqualified if they do not appoint the auditor within a month since Incorporation?

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 07 October 2010

Originally posted by : Saranya
	Will the Directors be disqualified if they do not appoint the auditor within a month since Incorporation?

Failure to appoint first director can not be considered as a ground for directors disqualification.

Thanks

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Saranya (Trainee) (39 Points)
Replied 07 October 2010

Thank you Sir

I have another question, whether the directors need to face any consequences for not appointing the 1st Auditor within one month of Incorporation?

The actual matter goes this way. The company(Private company) was incorporated on 01.04.2009 and the first auditor was appointed on 01.11.2009 by conducting an Extra Ordinary General Meeting. Will the directors be questionable for appointing the 1st auditor after 8 months of Incorporation?

Manjit Kumar Das (C.A.(IPCC) & C.S.(Final) Student) (282 Points)
Replied 13 June 2011

Sir can u Please explain "Doctrine of Exceptional Construction"....

Harshal Gautam Dawre (Student) (57 Points)
Replied 13 August 2012

Sir,

Please clarify whether we need to intimate to ROC for appointment of the first Auditor of the company

and is there any penalty for late intimation of such ?

Thanks & Regards

sapna goyal (new delhi) (21 Points)
Replied 16 August 2012

whether need to file e form 23B in case of appointment of first auditor?

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 16 August 2012

Originally posted by : sapna goyal
	whether need to file e form 23B in case of appointment of first auditor?

As per my personal opinion there is no need to file form 23B for the appointment of first auditor under section 224(5).

Form-23B is the requirement of section 224(1) when we appoint auditor in the AGM.

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prakash (Company Secretary) (1352 Points)
Replied 16 August 2012

I agree with Mr. Ankur Garg.

1 Like

Santosh Bhosale (STUDENT) (28 Points)
Replied 16 August 2012

What are consequences for the Viloation of the provision of 224 (5) - appointment of the First Auditor then a??? i.e. not appointment of the first auditor upto first AGM

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 17 August 2012

Appointment of first auditors in general meeting.—A company in general meeting may appoint the first auditor or auditors if the Board of directors fails to exercise its power of appointment of first auditors within one month of the date of incorporation of the company.

Penalty as provided in Section-629A would be applicable.

Tanveer Md Masood (Indispensable) (361 Points)
Replied 04 September 2012

DEAR EXPERTS...

FIRST AUDITOR SHOULD BE APPOINTED WITHIN ONE MONTH OF THE DATE OF REGISTRATION OF THE COMPANY FAILING WHICH THE COMPANY IN GM MAY APPOINT THE FIRST AUDITOR. THIS IS THE PROVISION IN SEC.224(1) OF THE COMPANIES ACT, 1956 .

REGARDS

TANVEER.