Understand the intricacies of auditor appointment under the Companies Act, 2013. Explore key points, eligibility criteria, filing requirements, and penalties for delayed submissions.
As per Section 139(6) of Companies Act, 2013 Every Company other than Government Company shall appoint first Auditor within 30 Days from the Date of Incorporation of Company with the Approval of Board of Directors and in case of failure, Directors shall inform to the Shareholders of Company, who shall appoint the Auditor within 90 days at an Extra Ordinary General Meeting of the Company and such Auditor shall hold office till the conclusion of Next (First) Annual General Meeting.
As per Section 139(7) appointment of Auditor in Government Company owned or controlled directly or indirectly by the Govt shall be made by the Comptroller and Auditor General of India within Sixty Days from the Date of Incorporation of Company.
In case of failure of appointment of Auditor within prescribed time Board of Directors shall appoint Auditor within next 30 days.
In case of failure of Board to appoint such Auditor within prescribed time the Board shall inform to Members of Company, who shall appoint the Auditor within 60 days at an Extra Ordinary General Meeting of the Company and such Auditor shall hold office till the conclusion of Next Annual General Meeting.
Eligibility of Auditor: –
1) The Auditor shall give written consent for appointment.
2) The Auditor shall certify eligibility for appointment.
3) The Auditor shall certify that appointment is within the term allowed.
4) The Auditor shall also certify that appointment is within the limit allowed.
Filing of Form ADT-1: –
Section 139 (1) says that the Company shall inform the Auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within Fifteen days of the meeting in which the Auditor is appointed.
There is no clarification regarding filing of form ADT-1 where appointment is done by Board of Directors (first Auditor appointment).
There is a loophole in this Section, advantage of which is taken by the companies and Professional by not Filing Form ADT-1 (First Auditor appointment) at the time of appointment of Auditor by Board of Directors in Board Meeting.
Now Companies are filing form ADT-1 only at the time of appointment / Re- appointment of Auditor in General Meeting instead of appointment in Board Meeting (appointment of First Auditor).
It is advisable for good practice to file Form ADT-1 every time whether it is appointed in Board Meeting (First Auditor Appointment) or in General Meeting.
Tenure of First Auditor: –
First Auditor shall hold office till the conclusion of first Annual General Meeting of the Company.
Company may Reappoint the same Auditor in Annual General Meeting who shall hold office till the conclusion of Next sixth Annual General Meeting.
Company may also appoint New Auditor in Annual General Meeting.
Penalty on Delayed Filing of Form ADT 1-: –
In the event of failure of filing Form ADT-1 within prescribed time frame Penalty will be imposed on Company and charged according to delay in Number of Days as below mentioned: –
| Delay in Filing (in No. of Days) | Penalty Leviable |
| Up to 30 days | twice the normal fees |
| More than 30 days but less than 60 days | 4 x normal fees |
| More than 60 days but less than 90 days | 6 x normal fees |
| More than 90 days but less than 180 days | 10 x normal fees |
| More than 180 days | 12 x normal fees |
Remuneration of Auditor: – As per Section 142(1) Remuneration of Auditor of a Company shall be fixed in its General Meeting or in such manner as may be determined therein.
Proviso of Section 142(1) in case of First Auditor appointed by the Board under Section 139, the Board of Directors may decide the Remuneration of such Auditor which shall continue till the Reappointment of Auditor in next Annual General Meeting.
Key Points to Remember: –
01- Appointment of First Auditor: – within 30 days of Incorporation by Bod’s. (Is it mandatory to appoint First Auditor in First Bboard Meeting?
most commonly asked question by Professionals, here it is important to clear that only 30 days will count from the date of Registration, Number of Meetings will not affect Provision.)
02- Failure of appointment by Bod’s: – Members will Appoint Auditor within 90 Days.
03- Auditor shall be eligible to appoint and fulfil all the required criteria of Appointment.
04- First Auditor shall hold office till the conclusion of First Annual General Meeting.
05- Reappointment / Appointment of Auditor at Annual General Meeting and same shall be intimated to Registrar by Filing Form ADT-1 at Ministry of corporate affairs (MCA) portal.
06- Auditor in General Meeting shall be Appointed for the term of Five Consecutive Years.
07- Form ADT-1 shall file within 15 days from the Date of Annual General Meeting.
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