Appointment of First Auditor In Case of Non-Government Company

APPOINTMENT OF FIRST AUDITOR BY BOARD OF DIRECTORS:

The First Auditor of a company (other than a Government Company) shall be appointed by the Board of Directors within 30 days from the date of registration/Incorporation of the company.

TENURE OF FIRST AUDITOR:

First auditor shall hold office till the conclusion of the First Annual General Meeting of the company.

PROCEDURE FOR APPOINTMENT OF FIRST AUDITOR:

Procedure of appointment of first auditor in case of a company, other than a Government company is as follows:

STEP 1:

The Company shall obtain certificate in writing from the proposed auditor confirming his/its:

• Eligibility and;
• Consent to act as auditor of the company.

STEP 2:

Issue notice to all directors as per Section 173 of the Companies Act, 2013 calling Board Meeting for appointment of First Auditor of the Company.

STEP 3:

Convene a Board meeting within 30 days of registration/Incorporation of the company and pass a resolution for:

• Appointing the first auditor and;
• Fixing his remuneration.

STEP 4:

Inform the first auditor so appointed with a certified true copy of the resolution and appointment letter.

STEP 5:

Company should file notice of such appointment in Form ADT-1 to Registrar within 15 days of such Board Meeting.

Following documents shall be attached with form ADT-1:

• Certified True Copy of Board Resolution;
• Intimation Letter given by the company to the Auditor;
• Consent Letter and Eligibility Certificate given by the Auditor to the Company;
• Appointment Letter.

APPOINTMENT OF FIRST AUDITOR BY THE MEMBERS, WHERE BOARD FAILS TO APPOINT:

If the Board fails to appoint First Auditor within 30 days from the date of registration/Incorporation of the company, it shall inform the members of the company and the members shall make the appointment of first auditor within 90 days of information at an Extra-Ordinary General Meeting.

TENURE OF FIRST AUDITOR:

First auditor shall hold office till the conclusion of the First Annual General Meeting of the company.

PROCEDURE FOR APPOINTMENT OF FIRST AUDITOR:

Procedure for appointment of first auditor in case of a company, other than a Government company is as follows:

STEP 1:

Issue notice to all directors as per Section 173 of the Companies Act, 2013 calling Board Meeting for appointment of First Auditor of the Company.

STEP 2:

Convene a Board meeting:

• To discuss the matter regarding appointment of First Auditor of the Company;
• To decide the day, date, time and place of Extra-Ordinary General Meeting which shall not be beyond 90 days of Board’s information of failure to appoint first auditor and
• To approve the notice of the Extra-Ordinary General Meeting.

STEP 3:

Issue notice of Extra-Ordinary General Meeting to the members of the company.

STEP 4

Hold the Extra-Ordinary General Meeting and pass Ordinary Resolution for appointing the first auditor.

STEP 5:

Inform the first auditor so appointed with a certified true copy of the resolution and appointment letter.

STEP 6:

Company should file notice of such appointment in Form ADT-1 to Registrar within 15 days of such Extra-Ordinary General Meeting.

Following documents shall be attached with form ADT-1:

• Certified True Copy of Ordinary Resolution;
• Intimation Letter given by the company to the Auditor;
• Consent Letter and Eligibility Certificate given by the Auditor to the Company;
• Appointment Letter.

FREQUENTLY ASKED QUESTIONS

Q.1 Which is the appointing authority of first auditor?

Answer: Pursuant to the provisions of Section 139(6) of the Companies Act, 2013:

• Board of Directors: Board of Directors are the appointing authority for appointment of first auditor;
• Members of the Company: If Board of Directors fails to appoint first auditor within 30 days from the date of incorporation of company then members of the company are appointing authority for appointment of first auditor.

Q.2 What is the tenure of First Auditor?

Answer: First Auditor shall hold office till the conclusion of first Annual General Meeting of the company and the First Auditor shall audit the accounts of the company related to its first financial year.

Q.3 Can a company re-appoint first Auditor at its First Annual General Meeting?

Answer: Yes, Company can re-appoint First Auditor at its First Annual General Meeting, who shall hold office for the period of Five Years from the conclusion of that First Annual General till the conclusion of its Sixth Annual General Meeting.

Q.4 Can a company appoint any other Individual or Firm (Other than First Auditor) as its Auditor at its First Annual General Meeting?

Answer: Yes, a company can appoint an Individual or Firm Other than First Auditor as its Auditor at its First Annual General Meeting.

Q.5 Is it mandatory to file Form ADT-1 with ROC for appointment of First Auditor?

Answer: Pursuant to the provisions of Companies Act, 2013, it is not mandatory to file Form ADT-1 for appointment of first auditor. Fourth proviso to Section 139(1) r/w Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014 provides for filing of Form ADT-1 only in case of appointment of auditor in Annual General Meeting.

Q.6 Who can be appointed as Statutory Auditor?

Answer: Following can be appointed as Statutory Auditor of a company:

• Practicing Chartered Accountant;
• Firm of Chartered Accountants; where majority of partners are practicing in India;
• Limited Liability Partnership.