For a newly incorporated Company:
The Board within 30 days from the date of incorporation of the Company, shall appoint the first auditor of the Company who shall hold office of the statutory auditor from the conclusion of that Board Meeting till the conclusion of First AGM of the Company and is liable to sign the Financial statement for the First Financial Year of the Company.
For the appointment of auditor for Subsequent to First Auditor/ already incorporated Companies:
As per Section 139 of the Companies act, 2013 and rules made thereunder, Every Company shall appoint the statutory auditor of the Company in its Annual General Meeting (“AGM”) who shall hold the office of auditor for a period of five years from the conclusion of that AGM until the conclusion of following fifth AGM of the Company.
Intimation to Registrar of Companies for the appointment of auditor:
The company shall file a notice in e-form ADT 1, alongwith the prescribed fee, of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed.
Attachments required to be attached in e-form ADT 1:
1. Consent of auditor along with the eligibility certificate from the Auditor.
2. Extracts of Meting (BM/AGM) in which auditor is appointed.
3. Appointment letter issued by the Company to the auditor.
Rotation of Auditors
None of the following class of companies
1. All listed Companies;
2. All unlisted public companies having paid up share capital of rupees ten crore or more;
3. All private limited companies having paid up share capital of rupees fifty crore or more;
4. All companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.
Shall appoint/reappoint
(i) An Individual as an Auditor cannot be appointed as an Auditor for a term of more than 5 years.
(ii) A firm of Auditors cannot be appointed as Auditors for more than two terms of 5 years. An Auditor who has completed his/her term of 5 years will also not be eligible for re-appointment for 5 years from completion of his/her term.
Important Note: a. The incoming auditor or audit firm shall not be eligible if such auditor or audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms.
b. Break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation.
c. If a partner, who is in charge of an audit firm and also certifies the financial statements of the company, retires from the said firm and joins another firm, such other firm shall also be ineligible to be appointed for a period of five years.
Casual Vacancy of Auditor
- Any casual vacancy of the auditor must be filled by the Board of Directors within 30 days.
- If the casual vacancy is on account of a resignation of an auditor, then the appointment of the auditor must be approved at an Extra-Ordinary General Meeting convened within 3 months of the recommendation of the Board.
About the Author
Author is Divya Goel, ACS working as Assistant Manager- Company Secretary with Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India. Author can be reached at info@neerajbhagat.com.
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