As per the Company 2013, the auditor’s responsibility has been enhanced to a great extent and the manner of appointing him has also been changed, when compared to companies Act, 1956. We here discuss briefly about the Auditors responsibility in light of Companies Act, 2013 for private companies.
Section 2(17) of Companies Act, 2013 ―chartered accountant means a person as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice under sub-section (1) of section 6 of that Act.
So a member of the institute who is not in practice is never a chartered accountant under the act.
Section 2(68) of Companies Act,2013 ―private company means a company having a minimum paid-up share capital as may be prescribed, and which by its articles,—
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred.
Companies (Amendment) Act, 2015 has removed the requirement of minimum paid up capital of a private company but has not introduced zero paid up capital. However, the authorised capital of Rs 1 lakh is still mandatory for opening a private limited company.
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1. Various types of Auditors under the companies act, 2013:
1. First Auditor:
Section 139(6) of Companies Act,2013 states that 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.
Law is silent about the start date of 90 days for an EGM to be conducted. So by a taking a stricter view 90 days has to calculated from date of incorporation and not from the date of expiry of the initial 30 days after incorporation.
However, for the appointment of first auditor, it is optional for the Company to file respective e-form with ROC.
Form ADT-1 has to be used by the Auditor to file his acceptance as an auditor for the company with 15 days of his appointment in the AGM.
2. Subsequent Auditor:
Section 139(1) of Companies Act,2013 states that 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 and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as may be prescribed.
After appointment of subsequent auditor in an AGM the company is required to file the respective e-form with ROC.
The company shall place the matter relating to such appointment for ratification by members at every AGM.
Form ADT-1 has to be used by the Auditor to file his acceptance as an auditor for the company with 15 days of his appointment/ratification in the AGM.
3. Rotation of Auditors:
Section 139(2) of Companies Act,2013 states that a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appoint—
- an individual as auditor for more than one term of five consecutive years; and
- an audit firm as auditor for more than two terms of five consecutive years
Class of companies for whom rotation is applicable:
- Having Paid Up Share Capital of fifty crore rupees or more.
- Having Public borrowing from financial institutions, banks of fifty crore rupees or more.
4. Casual Vacancy:
Section 139(8)(i) of Companies Act,2013 states that Casual Vacancy shall be filled by the BOD within thirty days, but if such casual vacancy is as a result of the resignation of an auditor such appointment shall also be approved by the company at a general meeting convened within three months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting
It means that if casual vacancy arises on account of resignation then shareholders have to approve the recommendation of BOD for the appointment of auditor.
In the event of casual vacancy created by an auditor he has to file form ADT-3 with 30 days of his resignation and subsequently the auditor appointed under casual vacancy has to file ADT-1 within 15 days of his appointment.
5. Reappointment of an Auditor:
Section 139(9) of Companies Act,2013 states that a retiring auditor may be re-appointed at an annual general meeting, if—
(a) he is not disqualified for re-appointment;
(b) he has not given the company a notice in writing of his unwillingness to be re-appointed; and
(c) a special resolution has not been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.
Various Forms under Companies Act, 2013 related to Auditor Appointment & Removal
1. ADT-1: Appointment of Auditor
2. ADT-2: Removal of auditor before expiry of his term
3. ADT-3: Notice of Resignation by an Auditor.
For all the above forms fees and additional fees depends on the amount of authorised capital.
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