Auditor Appointment: Every company is required to appoint an auditor under Companies Act, 2013. Submit Board Resolution and Auditor's Consent Letter and get your Auditor appointed.

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Auditor Appointment

Who is an Auditor:

An Auditor is an independent person/firm who is engaged to do audit, review and verify the accuracy of financial records and to express an opinion on whether or not the company's financial statements are free from any material misstatements due to fraud or error.

Every company has to appoint an auditor irrespective of business size. The company has to appoint an auditor even if they do not have any transactions.

Eligibility, Qualifications and Disqualification of Auditors:

Qualification:

Individual: A person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant.

Firm: A firm whereof majority of partners are Chartered Accountant and practicing in India may be appointed by its firm name to be auditor of a company. However, the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm.

Eligibility:

The following persons shall not be eligible for appointment as an auditor of a company, namely:

  • (a) a body corporate other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008;

  • (b) an officer or employee of the company;

  • (c) a person who is a partner, or who is in the employment, of an officer or employee of the company;

  • (d) a person who, or his relative or partner:

    (i) is holding any security of or interest in the company or its subsidiary, or of its holding or associate company or a subsidiary of such holding company:

    Provided that the relative may hold security or interest in the company of face value not exceeding one thousand rupees or such sum as may be prescribed;

    (ii) is indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of such amount as may be prescribed; or

    (iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, for such amount as may be prescribed;

  • (e) a person or a firm who, whether directly or indirectly, has business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company of such nature as may be prescribed;

  • (f) a person whose relative is a director or is in the employment of the company as a director or key managerial personnel;

  • (g) a person who is in full time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding appointment as auditor of more than twenty companies.

  • (h) a person who has been convicted by a court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction;

  • (i) a person who, directly or indirectly, renders any service referred to in section 144 to the company or its holding company or its subsidiary company.

Disqualification:

Where a person appointed as an auditor of a company incurs any of the disqualifications mentioned as above after his appointment, he shall vacate his office as such auditor and such vacation shall be deemed to be a casual vacancy in the office of the auditor.

Appointment of an Auditor:

The First Auditor and Subsequent Auditor are appointed as below:

First Auditor:

For Government Companies - Section 139(7): In the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments, the first auditor shall be appointed by the Comptroller and Auditor-General (CAG) of India within sixty days from the date of registration of the company and in case the Comptroller and Auditor-General (CAG) of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next thirty days; and

In the case of failure of the Board to appoint such auditor within the next thirty days, it shall inform the members of the company who shall appoint such auditor within the sixty days at an extraordinary general meeting, who shall hold office till the conclusion of the first annual general meeting.

Other than Government Companies - Section 139(6): The first auditor of a company, other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company and

In the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting.

Subsequent Auditor:

For Government Companies - Section 139(5): In case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments:

The Comptroller and Auditor General (CAG) of India shall, in respect of a financial year, appoint an auditor duly qualified to be appointed as an auditor of companies, within a period of one hundred and eighty days from the commencement of the financial year, who shall hold office till the conclusion of the annual general meeting.

Othr than Government Companies - Section 139(1): Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting.

Documents required for appointment of an Auditor:

The following documents are required for appointment of an auditor.

  • Written consent of the auditor
  • A certificate from auditor that the appointment, if made, shall be in accordance with the following conditions that:

    (i) the individual or the firm, is eligible for appointment and is not disqualified for appointment under the Companies Act, 2013, the Chartered Accountants Act, 1949 and the rules or regulations made thereunder;

    (ii) the proposed appointment is as per the term provided under the Companies Act, 2013;

    (iii) the proposed appointment is within the limits laid down by or under the authority of the Companies Act, 2013;

    (iv) the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct; and

    (v) that the auditor satisfies the criteria provided in section 141 of the Companies Act, 2013.
  • A board or members resolution

Auditor appointment process:

The following process involved in appointment of auditor:

  • (a) The Company shall place the matter before the Board Meeting/General meeting with specific mention of Tenure and term & Conditions of the Appointment.
  • (b) The company shall inform the auditor concerned of his or its appointment by issuing the Appointment letter.
  • (c) The Company should take written confirmation from the Auditors for his appointment.
  • (d) The Company shall file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed in form ADT-1.

Let's Clear Your Doubts


Who is an Auditor?

An Auditor is an independent person/firm who is engaged to do audit, review and verify the accuracy of financial records and to express an opinion on whether or not the company's financial statements are free from any material misstatements due to fraud or error.

Who is First Auditor?

The first auditor is the auditor appointed by the board of director or company with in 30 days or 90 days respectively from the date of incorporation.

Is Auditor appointment mandatory in a Company?

Yes. Every company has to appoint an auditor irrespective of business size. The company has to appoint an auditor even if they do not have any transactions.

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Is Auditor appointment mandatory for LLP?

No. If the turnover of LLP exceeds Rs. 40 lakhs in a year or the capital contribution exceeds Rs. 25 lakhs, then auditor appointment is mandatory in LLP.

Do we need to file any document for the appointment of an auditor?

Yes. You need to file Form ADT-1 with in 15 days of appointment with the Registrar of Companies, MCA.

How much time taken to appoint an auditor?

With in 10 minutes, you can appoint an auditor.

What is the government fee for auditor appointment?

It depends on the company's authorised share capital. For one lakh authorised share capital company, the auditor appointment fee is Rs. 300/-.

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Submit Auditor consent letter, certificate, Pan, Aadhar, his Mobile and Email and get the auditor appointed!