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Statutory Auditor

Sarika Agarwal (Service) (151 Points)

07 January 2011

Ours is a private joint venture company incorporated in 2008. The Company has appoinetd its first statutory auditors as per the name mentioned in the Article. The Article says.

The first auditors of the Company shall beM/s. XYZ limited or such other firm of chartered accountants of recognized international standing as may be agreed between the Shareholders from time to time.

Now the company wants to appoint new auditor ABC Limited.

My query is since the company is appointing new auditor ABC limited is it required to amend its article by adding a new clause as to ABC limited are the presently the statutory auditors of the company......

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15 Replies

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 07 January 2011

First Auditors are appointed within one month of the date of Registration of the Company

The First Auditor need not be the one though his name appears in the Articles of Association

No need to amend Articles for appointing another auditor as First Auditor

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nidhigoel89 (Company Secretary ) (594 Points)
Replied 07 January 2011

Hello!

As per my views appointment of auditor by way of MOA/AOA is not a valid appointment..................in case of first auditor that should be appointed in BM by BOD. and further reappointment or new appointment is to be made in GM......

Any further views on that............

Regards

NIdhi

ankit jain (CS trainee) (152 Points)
Replied 07 January 2011

Hi Friends,

I agree with nidhi but not completely. The appointment of first auditors by way of MOA/AOA is valid, but if we read the clause then it says that

The first auditors of the Company shall beM/s. XYZ limited or such other firm of chartered accountants of recognized international standing as may be agreed between the Shareholders from time to time.

Means it gives the authority to the member to appoint any statutory auditor other than the name mentioned but the auditors must be Chartered Accountant of recognised international standing. So, internal must have posses such qualification and appointment must be approved in AGM only. If any changes you want to do then you have to alter the AOA then only you can appoint the statutory auditors.

Any other view is highly appreciated.

Thanks in advance

nidhigoel89 (Company Secretary ) (594 Points)
Replied 07 January 2011

Hello Ankit!

I appreciate the way u respond.....

Bt here i want to add on that the first auditor cant be appointed by way of MOA/AOA nd that is given in some publication of ICAI.....i dnt have that copy right now.....bt if i will find then definatly i would attach here............If still i m lacking somewhere then correct me...............

Regards

Nidhi

Sarika Agarwal (Service) (151 Points)
Replied 07 January 2011

We have already appointed XYZ as First Audtior as defined in the AOA. Now i want to change the auditor by appointing ABC as the Statutory Audtiro. Do i need to amend the articles by adding one more clause that ABC are our newly appointed Statutory Auditor.???

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nidhigoel89 (Company Secretary ) (594 Points)
Replied 07 January 2011

Hello Sarika!

you need not to amend ur articles.....As ur articles is specific only for first auditor.....So as per my views NO NEED TO AMEND UR ARTICLES....

Regards

Nidhi

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 07 January 2011

Amendment of articles is not at all required.

As rightly said statutory auditors are appointed by members at each Annual General Meeting. Even the first auditors appointed in the Board meeting shall hold office only upto the first AGM. Then at each AGM auditor has to be appoointed by the members. As per Section 224(3) where at an AGM no auditors are appointed or reappointed the CG may appoint an auditor. As per Section 224(4) the company shall within 7 days of AGM must intimate the CG if no auditor is not appointed. In case of default, the company and every officer of the company shall be punishable with fine of Rs. 5000/-.

It seems you are not complying with statutory provisions with regard to appointment of auditor.. This is violation of Section 224 of the Companies Act attracting penal provisions.

Auditors cannot be named / appointed by MOA / AOA. Only the directors can be named as first directors or directors for life.

In your case if AGM for the FY ending 31/03/2010 is not yet held, then convene AGM and appoint an auditor for the FY 2010-11 in the AGM or the remedy is to approach CG.

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Sarika Agarwal (Service) (151 Points)
Replied 07 January 2011

Thank you so much Jayashree... I agree that in articles should not name the Auditors but ours is a Joint Vetnure company so it is named.

Our next AGM shall be in September, 2011 for finanical year 2010-2011. in that AGM i can change appoint new auditor... M i correct... ???

Rock on (CA Final) (340 Points)
Replied 07 January 2011

No need to amend article or MOA at all.....

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 07 January 2011

You are right. But auditor for current year should have been appointed in 2010 AGM. So there is violation attracting penal provisions.

For further clarification call me on 09003193642

Regards,

Jayashree

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Sarika Agarwal (Service) (151 Points)
Replied 07 January 2011

Dear Jayashree.

Thanks for the advice. Company has already appointed Statutory Auditor for financial year 2010-2011 in September, 2010 AGM and they only shall be conducting audit for 2010-2011. We want to change auditor for 2011-2012.

Sorry I am not above to understand the sentence you have stated:-

But auditor for current year should have been appointed in 2010 AGM. So there is violation attracting penal provisions.

Please try to explain////

RADHIKA JALAN (agarwal) (1521 Points)
Replied 07 January 2011

agree wid jayashree....

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(Guest)

Originally posted by : RADHIKA JALAN
	agree wid jayashree....

Thanks Radha mam

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 07 January 2011

Originally posted by : Sarika Agarwal
	Dear Jayashree. Thanks for the advice. Company has already appointed Statutory Auditor for financial year 2010-2011 in September, 2010 AGM and they only shall be conducting audit for 2010-2011. We want to change auditor for 2011-2012. Sorry I am not above to understand the sentence you have stated:- But auditor for current year should have been appointed in 2010 AGM. So there is violation attracting penal provisions. Please try to explain////

Nowhere in your query you mentioned that auditor for 2010-11 has been appointed in the AGM held in September, 2010. If they have been appointed so, no violation. Proceed for change in the next AGM.

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