In this article, the author has discussed about the provisions related to Auditor Appointment as given under the Companies Act, 2013.
Q1. Who is required to appoint/ re-appoint an Auditor?
-Every company shall
-at the first annual general meeting (AGM)
-appoint an individual or a firm as an auditor
Q2. What is the manner and procedure of selection and appointment of auditors?
|Particulars||Where Audit Committee is constituted (u/s 177)||Other cases- Board of Directors|
|Considering the qualifications and experience of the individual or firm proposed to be appointed as Auditor||the committee shall consider||the Board shall consider and correspond with the size and requirements of the company|
|Proceedings of professional misconduct, if any||The committee or the Board shall examine such proceedings against the proposed Auditor, if any, before the Institute of Chartered Accountants of India (ICAI) or any other competent authority|
|Calling information||The committee or the Board may call for such other information, as necessary, from the proposed Auditor|
|Recommending Auditor for appointment||The committee shall recommend the name of an individual or firm to the Board for consideration.
i) If Board agrees, it shall further recommend such name to the members in the AGM; or
ii) If Board disagrees, it shall cite reasons and refer back to the committee for consideration
|the Board shall recommend an individual or firm to the members in the AGM|
|Auditor to hold office||The auditor appointed in the AGM shall hold office from the conclusion of that meeting till the conclusion of the 06th AGM|
(Where a company is required to constitute an Audit Committee under section 177, all appointments, including the filling of a casual vacancy of an auditor under this section shall be made after taking into account the recommendations of such committee.)
Q3. What are the Pre-requisites to appointment?
Following shall be obtained from the Auditor, before making such appointment: –
Q4. What are the conditions to appointment?
Q5. What is the eligibility criteria, qualifications/ disqualifications of Auditor?
The Auditor has to provide a certificate indicating that he/she satisfies the criteria as given under section 141 of the Act, which reads:
i) Individual who is a chartered accountant can be appointed;
ii) A firm with majority of its partners practising in India, may be appointed by its firm name;
iii) A limited liability partnership (LLP) whose partners are chartered accountants can act and sign on behalf of the firm
i) a body corporate other than a LLP registered under the Limited Liability Partnership Act, 2008;
ii) an officer or employee of the company;
iii) a person who is a partner, or who is in the employment, of an officer or employee of the company;
iv) a person or his relative or partner, who in relation with the company/ its subsidiary/ associate/ holding or subsidiary of such holding company—
Q6. What is the effect of disqualification of Auditor?
If the auditor appointed incurs any of the disqualifications (as mentioned above) after his appointment, he shall vacate his office as such auditor and such vacation shall be deemed to be a casual vacancy in the office of the auditor.
Q7. What is the tenure of auditor appointed?
The following companies-
shall not appoint/ re-appoint: –
(i) an individual as auditor for more than one term of 05 consecutive years; and
(ii) an audit firm as auditor for more than two terms of 05 consecutive years
Q8. In what cases re-appointment is not allowed?
(i) an individual auditor cannot be re-appointed in the same company for five years from the completion of his term
(ii) an audit firm cannot be re-appointment in the same company for five years from the completion of such term
(iii) an audit firm having a common partner(s) to the other audit firm, whose tenure has expired in a company immediately preceding the financial year, cannot be appointed as auditor of the same company for a period of five years
Provided also that every company, existing on or before the commencement of this Act which is required to comply with the provisions of this sub-section, shall comply with requirements of this sub-section within a period which shall not be later than the date of the first annual general meeting of the company held, within the period specified under sub-section (1) of Section 96, after three years from the date of commencement of this Act.
For e.g.- Let’s assume that date of commencement of the Act is 01.04.2014, then all companies existing before that date will have to comply with the requirements of the Act, by meeting such provisions, upto the due date of ensuing Annual General Meeting of such companies to be held as per section 96 after 01.04.2017 (i.e. due date of AGM shall be 30.09.2017)
Provided also that, nothing herein shall affect the right of the company to remove an auditor or the right of the auditor to resign from such office of the company.
Q9. What is the appointment process?
Q10. What is the role of Comptroller and Auditor-General of India (CAG)?
The Comptroller and Auditor-General of India shall-
in the case of following companies-
FIRST AUDITOR to be appointed–
Q11. When does the Board appoint Auditor in the company?
Q12. What is the course of action in case of casual vacancy in the office of Auditor?
|A company whose accounts are subject to audit by an auditor appointed by the Comptroller and Auditor-General of India||Other companies|
|Casual Vacancy be filled by the Comptroller and Auditor-General of India within 30 days;||Casual vacancy be filled by the Board of Directors within 30 days;|
|If not done by CAG of India, the Board of Directors shall fill the vacancy within next 30 days||But in case of casual vacancy arising out of resignation by Auditor, then such appointment shall also be approved by the company at a general meeting convened within 03 months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting|
Q13. What is the status of retiring Auditor?
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
(Where at any annual general meeting, no auditor is appointed or re-appointed, the existing auditor shall continue to be the auditor of the company.)
CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE FIRST BOARD MEETING OF THE BOARD OF DIRECTORS OF ________________ HELD ON ___________, AT _______AM/PM AT THE REGISTERED OFFICE OF THE COMPANY SITUATED AT ____________________________.
“RESOLVED THAT pursuant to Section 139 and other applicable provisions, if any, of the Companies Act, 2013 as amended from time to time or any other law for the time being in force (including any statutory modification or amendment thereto or enactment thereof for the time being in force) M/s. __________________, Chartered Accountants (Firm Registration No. ___________), be and is hereby appointed as the first Statutory Auditors of the Company to hold office until the conclusion of first Annual General Meeting on a remuneration plus out of pocket expenses as may be decided by the Chairman in consultation with the Auditors.
RESOLVED FURTHER THAT any director of the Company be and is hereby authorized to do all such acts, deeds, matters and things as may be necessary, proper, expedient or incidental for giving effect to this resolution and to file necessary e-forms with the Registrar of Companies.”
CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE ANNUAL GENERAL MEETING OF THE SHAREHOLDER OF _______________________ PRIVATE LIMITED HELD AT THE REGISTERED OFFICE OF THE COMPANY SITUATED AT ______________________________________ ON _____________ DAY, AT __________AM/PM.
“RESOLVED THAT pursuant to the provisions of Section 139, 142 and other applicable provisions of the Companies Act, 2013, if any, read with the Companies (Audit & Auditors) Rules, 2014, including any statutory enactment or modification thereof, Mr. ____________________ & Co, Chartered Accountants, (Firm Registration No. ________________) be and is hereby appointed as the Statutory Auditors of the Company and to hold the office from the conclusion of this Annual General Meeting till the conclusion of the sixth Annual General Meeting of the Company, at a remuneration to be decided by the Board of Directors in consultation with the Auditors plus applicable goods and services tax and reimbursement of traveling and out of pocket expenses incurred by them for the purpose of audit.
RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorized for and on behalf of the Company to take all necessary steps and to do all such acts, deeds, matters, and things which may deem necessary in this behalf.”
Author: ARSHPREET K. & CO., Practicing Company Secretaries based at Chandigarh.
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Disclaimer: The contents of this article are based upon the significant provisions of the Companies Act, 2013 existing at the time of its compilation. This initiative is just for information purposes and not to be treated as any professional advice and is further subject to change without notice. Therefore, I do not assume any responsibility for the consequences arising out of use of such information.