CA Amresh Vashisht, Meerut

CA AMRESH VASHISHTAn auditor who is expected to make an independent report to a company’s members is well regulated through the company law. Its appointment, reappointment, ratification, resignation are well defined in Companies Act 2013. The independent auditor has a responsibility to his profession, the responsibility to comply with the standards accepted by his fellow practitioners. The professional qualifications required of the independent auditor are those of a person with the education and experience to practice as such.


As per section 139 (6), the Appointment of first auditor shall be made by the board within 30 days of registration of the company. If the Board fails to appoint the first auditor within given time, then it shall inform members and members shall make the appointment of the first auditor within 90 days of information at an EGM. The First Auditor shall hold office till the conclusion of first AGM. However No time period is mentioned for Board to inform the members about the Non appointment of first auditor. If a casual vacancy is rising by resignation, then the vacancy shall be filled by the Company in its meeting within 3 months from the date of the recommendation of the Board. Whereas casual vacancy is rising by other than resignation, then the vacancy shall be filled the Board within 30 days.

As per section 139 (7) Appointment of first auditor in case of Government Company or a company owned/ controlled by CG/SG/CG shall be made by CAG within 60 days of registration of the company. If CAG fails to appoint the first auditor within given time, then Board of such company shall appoint first auditor within 30 days. If the Board fails to appoint the first auditor within given time, then it shall inform members and members shall make the appointment of the first auditor within 60 days of information at an EGM. The First Auditor shall hold office till the conclusion of first AGM. Casual vacancy shall be filled by CAG within 30 days. If CAG fails to fill the vacancy within given time, then BOD shall fill the vacancy within 30 days.

First auditor, either appointed in the Board of Directors or in extraordinary general meeting, shall hold office up to first AGM only.


As per 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. The tenure of 5 consecutive years is subject to ratification by shareholders at every AGM. As per section 142 (1) the remuneration of the auditor of a company shall be fixed at its general meeting or in such manner as may be determined therein.


Appointment or Re appointment of Auditor is Ordinary Business so in line with that Ratification to continue of Auditor will be ORDINARY BUSINESS. Appointment of Statutory Auditor shall be subject to ratification in every annual general meeting till the sixth such meeting by way of passing of an ordinary resolution. No need to file ADT-1 in case of ratification being ordinary business.


As per Section 139 (1), before placing the business for ratification of auditor before the AGM the Company must obtain an eligibility certificate from the Auditor. The auditors must in pursuance of the requirement of section 139 of the Companies Act, 2013 and rule (4) of Companies Audit and Auditors) Rules, 2014, must confirm that:

a. The firm is eligible for ratification and is not disqualified to continue as statutory auditor under section 141 of the Companies Act, 2013, the Chartered Accountant Act, 1949 and rules and regulations made there under;

b. The ratification would be as per the terms provided under the Act.

c. There are no proceedings pending against either of the partners or the firm with respect to professional matters of conduct.


As per Section 139 (1), the Company shall place the matter relating to such appointment for Ratification by members at every Annual General Meeting. Companies are required to ratify the appointment of Statutory Auditors who was appointed in last AGM for 5 financial years. Therefore, from this year, every year at the AGM an Ordinary Resolution is to be passed for ratification to continue as Statutory Auditor of the Company. There is NO need to file ADT-1 for ratification of Auditor. Ratification is neither appointment nor re-appointment. Explanatory Statement may be given in Notice of AGM for Ratification of Auditor though being ordinary resolution legally not required.


1. BOD shall consider the ratification in a BOD meet calling for AGM. The ratification shall be for (name of firm), chartered accountants as statutory auditors of the Company.

2. The Company must obtained from the Auditors, a certificate as required under Section 139 of the Companies Act, 2013 to the effect that they are eligible to continue as statutory auditor of the Company.

3. The AGM notice must carry the resolution to ratify the previous auditor. The Board must consider the matter and should decide that the ratification of the Auditors be recommended to the shareholders at the forthcoming Annual General Meeting from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting of the Company at a remuneration to be mutually decided.

4. The AGM must passed a resolution as ordinary business pursuant to Sections 139, 142 and other applicable provisions, if any, of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 ratifying the appointment of (Name of Firm), Chartered Accountants, (Firm Registration Number ), as Auditors of the Company to hold office from the conclusion of this Annual General Meeting (AGM) till the conclusion of the next AGM of the Company to be held in the year …………”

5. The Company must issue a letter to the Auditor within 15 days of AGM.


1. In the previous year the Auditor has been appointed for ONE year in last AGM. Now in this year Auditor shall be treated as retiring auditor. Procedure prescribed u/s 140(4) has to be followed:

i) Special notice is required to appoint new auditor.

ii) Send copy to retiring auditor.

iii) Receive representation from auditor.

iv) Send it to members or read in AGM (if received late).

v) Company shall pass ordinary resolution for appointment of new auditor. There is no requirement to file MGT 14(as no special resolution) and no ADT3 is required as auditor has served this term of 1 year in full.

2. The Auditor has given his unwillingness to continue as auditor after conclusion of the AGM. He has given his unwillingness given one month before the AGM. Resolution to retiring auditor & Sec 140 (4) to follow. Hence No ADT3 is required.

3. The auditor has been appointed for 5 years in last AGM but later given his unwillingness to continue after this AGM. ADT 3 is required to be filled as he had not served his term of 5 years. It will result in the casual vacancy by resignation (as he resigned before his term) & new auditor can be appointed at the annual general meeting. However, he will hold office up to the Company cannot change the auditor in AGM, appointed for 5 years, except in case of auditor resignation or removal of auditor by approval of CG.

4. Procedure prescribed u/s 140(4) of special notice for appointment of other auditor, are for retiring auditor only i.e. if he had completed his term of appointment.

5. Casual vacancy of auditor by resignation shall be filled in GM & he shall hold office up to next AGM .In case of other reasons for casual vacancy, it can be filled by BOD.

6. Resignation of Existing Auditor and appointment of New auditor will be as follows:

a. Receive the Resignation Letter along with Form ADT-3 from the resigning Auditor.

b. Call a Board Meeting for acceptance of the resignation.

c. Call a Board Meeting for filing the Casual Vacancy and approve the notice for EGM

d. Hold the EGM and approve the Auditor’s Appointment.

e. File MGT-14 for the filing of the Resolution passed at EGM

f. File ADT-1 for new Auditor’s Appointment.

7. The auditor must give reasons for resignation with ROC within 30 days along with resignation letter. The 30 days time for filing ADT-3 with the ROC starts from the date of resignation i.e. the date written in the resignation letter. The auditor is required to file a statement specifying the reasons and fact of resignation within 30 days of resignation with ROC and the company or CAG in case of Govt. Companies. If the auditor fails to comply with the above mentioned provisions then he shall be punishable with fine of Rs. 50,000- Rs. 500,000.

About the Author– Author was Member of ICAI- Capacity Building Committee 2010-11 and ICAI- Committee For Direct Taxes 2011-12 and can be reached at email or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA

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