CS Divesh Goyal
It is inevitable that ‘dynamic environment demands constant changes’. One of such change had been made in the Companies Act by notifying the Companies Act, 2013.
In the present article we deal with the provisions of the 2013 dealing with the Auditors of the Company. The auditors of a company play a vital role towards the stakeholders of such company. The Auditors are required to audit the books of accounts of the company and report to the shareholders regarding the affairs of the Company which are carried out by the directors of the Company in the fiduciary capacity.
The provision related to auditors in the 2013 Act contains drastic changes as compared to the 1956 Act. The important one is defining the role of Auditors.
This article contains the description of some provisions related to auditors which have been modified in companies Act, 2013.
PROCEDURE FOR APPOINTMENT OF AUDITOR:
Appointment of FIRST AUDITOR in case of every company except govt. company or company owned/ controlled by CG/SG/CG and SG [139(6)]:-
- The First auditor of a company, other than a Government Company, shall be appointed by the BOARD OF DIRECTORS WITHIN THIRTY DAYS OF THE DATE OF INCORPORATION of a company. The auditor so appointed, shall hold office until the conclusion of the first annual general meeting.
- IF THE BOARD FAILS to appoint the first auditor, it shall inform the MEMBER of company, who shall within 90 days at an Extra Ordinary General Meeting shall appoint auditor.
{There is different view of different persons, persons have view that No time period is mentioned for Board to inform the members about the Non appointment of first auditor.} But According to my VIEW: If the Board fails to appoint the First Auditor, an Extra Ordinary General meeting will be called by the Board to appoint the first auditor within 90 days of incorporation.
In case of appointment of First auditor by Board of Director of company pursuant to section 139(6), company is under no obligation to give notice to appointment of First Auditor to the Registrar. THERE IS NO NEED TO FILE ANY FORM WITH ROC FOR APPOINTMENT OF FIRST AUDITOR.
For the company incorporated after 01st April, 2014 first Auditor shall hold office until the conclusion of the first annual general meeting of company.
APPOINTMENT OF AUDITOR AT FIRST ANNUAL GENERAL MEETING (AGM):
Every company shall at First Annual General meeting (AGM) appoint an individual or firm as an Auditor to hold office from the conclusion of that meeting till the conclusion of the sixth (6th ) Annual General Meeting (AGM).
- The duration of auditor of company will be term of consecutive Five (5) years each for Individual and Two terms of Consecutive Five (5) years in case of Auditor Firm.
** BUT the provision of 5 Year and 10 year will not applicable on One Person Company and Small Companies as per Rule-5 The Companies (Audit and Auditor) Rules, 2014.
MATTER IN RESPECT OF FIRST APPOINTMENT AT AGM:-
A. Ratification at Every Annual General Meeting (AGM):- [First Proviso of Section-139 (1)]
Although the duration of office is Five (5) years and Ten (10) years, the company will place the matter for ratification at every AGM.
LANGUAGE OF NOTICE OF AGM (ORDINARY BUSINESS):
RESOLVED THAT Auditor or Auditor Firm, Chartered Accountants (Registration No.—————), who retire at the conclusion of this Annual General Meeting, be and are hereby re-appointed as Statutory Auditors of the Company till the conclusion of the next Annual General Meeting at a remuneration to be fixed by the Board of Directors of the Company and billed progressively.
B. CONSENT AND CERTIFICATE FROM AUDITOR:- [Second Proviso of Section-139 (1)]:
Documents Require from Auditor before Appointment in AGM
→ WRITTEN CONSENT of auditor for such appointment.
→ CERTIFICATE from auditor for such appointment.
→ Under Rule 4 of Chapter-X, Auditor shall state in said certificate that he satisfy the condition given below: (Third Proviso of Section- 139(1);
- The individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made there under;
- The proposed appointment is as per the term provided under the Act;
- The proposed appointment is within the limits laid down by or under the authority of the Act;
- The list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
ACCORDING TO ME COMPANY SHOULD ISSUE LETTER TO AUDITOR FOR HIS APPOINTMENT –FORMAT GIVEN BELOW
C. INTIMATION TO AUDITOR & NOTICE TO REGISTRAR :- [Fourth Proviso of Section-139 (1)]:
The Company shall with in Fifteen (15) Days of Annual General Meeting (AGM) :
- Inform the Auditor of his Appointment.
- File Notice of such appointment with ROC in Form- ADT-1 [Attach form ADT-1 in E-Form- GNL-2 ] and file with ROC (As per MCA Circular No. 09/2014 dated April 25, 2014.
*Earlier auditor used to file Form 23B and inform ROC, now the company is to inform ROC, so in a way they shifted the burden to inform on Company.
Appointment of first auditor in case of govt. company or company owned/ controlled by CG/SG/CG and SG139 (7):- Appointment of first auditor 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 Board fails to appoint the first auditor within given time then it shall inform to members and members shall make the appointment of first auditor within 60 days of information at an EGM. The First Auditor shall hold office till the conclusion of first AGM.
| YOU MAY SEE THE FOLLOWING TABLE SHOWING THE RELEVANT PROVISIONS RELATING TO APPOINTMENT OF FIRST AUDITOR OF COMPANY. | |
| Which Section will apply for appointment of First Auditor | Section 139(1) |
| Who will Appoint First Auditor | Board of Directory By Passing Board Resolution in Board Meeting |
| Time Limit for Appointment of First Auditor | Within 30 days from Incorporation of Company |
| Who will Appoint Fist Auditor if Board of Director Fails to Appoint First Auditor | Members of Company by Passing of Ordinary Resolution in Extra Ordinary General Meeting |
| What is the Tenure of Office of First Auditor? | First Auditor may hold office until conclusion of First Annual General Meeting |
| Whether First Auditor can be remove before First Annual General Meeting, If appointed in Board Meeting. | Yes, By Board of Directorsl |
| Whether First Auditor can be remove before First Annual General Meeting, If appointed in General Meeting. | Yes, by Members of Company by Passing of Special Resolution, After obtaining the previous approval of Central Government in that behalf |
| Whether First Auditor can be Appoint Through AOA & MOA. | No, the Appointment of First Auditor by the Articles of Company will not be valid. |
FORMAT OF INTIMATION BY THE COMPANY TO STATUTORY AUDITOR OF HIS APPOINTMENT /RE-APPOINTMENT
Date
Address of the Auditor/firm
Dear Sirs
Sub : (Re-)appointment as Statutory Auditors of the Company.
With reference to the above subject, we wish to (re-)appoint you/your firm as the Statutory Auditors of the company
Please let us know that you are duly qualified and eligible for this appointment as per the provisions of section 139 and 141 of the Companies Act, 2013 and rules made there under and your written consent to act as Statutory Auditors of the Company from the conclusion of ensuing Annual General Meeting to the ….th Annual General Meeting.
You are also requested to issue a certificate to the company under Section 139(1) of the Companies Act, 2013 on the following matters:
1. You/the firm satisfies the criteria provided under Section 141 of the Companies Act, 2013;
2. the individual or the firm is eligible for appointment and is not disqualified for appointment under the Companies Act, 2013 the Chartered Accountants Act, 1949 and the rules or regulations made there under;
3. the proposed appointment is as per the term provided under the Companies Act, 2013 ;
4. the proposed appointment is within the limits laid down by or under the authority of the Companies Act, 2013 ;
5. Details of any order or pending proceeding relating to professional matters of conduct against the auditor before the Institute of Chartered Accountants of India or any competent authority or any Court. and the list of proceedings against (you) or the firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
Yours truly
Company Secretary
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Author Bio
As per Companies act at Section 139
At every Agm company has to appoint auditor who shall hold the office from 1st Agm to 6th Agm I.e tenure is of 5 years
So the period of an auditor who was appointed in first board meeting of the company till 1st Agm (will this period be included in the tenure of 5 years or not)
Procedure First Auditor Appointment Throught EGM
In case of Govt. Company auditor is appointed by the CAG of India and not by shareholders.Will it be necessary for such type of Company to file Form ADT-1?
How Can i Appoint Auditor in OPC……I have taken AGM as on date 30/09/2016 and filed AOC-4 N MGT-7….Should i Appoint in AGM or other option is there
how to appoint a auditor for OPC?
can Director sign the Board resolution for re-appointment of Cost Auditor?
6. Section 139 of Companies Act, 2013 requires appointment of auditors for a period of 5 years at a time. However, some of the Companies’ management insists for appointment for one year i.e. only upto next AGM only. Whether it will be valid?
if first auditor is not appointed by a private limited co. within 30 days of incorporation and within 90 days by the shareholders then what will be the procedure of appointment and what will be the consequences.
please reply me as early as possible..
I am telling you Opc co. Appointment of auditor compulsory please reply me mail I’d csimrankhan @ gmail.com
The article is informative and very resourceful
Dear Sir,
PLZ guide me.
A private co wants to remove the auditors before their tenure. They were appointed in last AGM for 5 years. Can u clarify the process of removal of auditors and appointment of other auditors for the FY 2014-15. Can they be removed and audit to be conducted by the new auditors for fY 2014-15.
I will be highly obliged.
If intimation to registrar of ist auditor appointed by BOD not required then who we can fill SRN no. of 23B in form 23AC..Please guide
the article is informative and very resourceful. However I would like to have clarification on the part of article which states that no form is required to be filed in case of appointment of 1st Auditor.
If no intimation is made to ROC for 1st auditor then how can ROC have track whether CO. has made any default in the provisions regarding auditor’s appointment and also on no. of audit undertaken by such 1st auditor.
what happened if private limited companies unable to appoint their first auditor even after 2 years of incorporation ?
Dear Sir,
PLZ guide me.
A closely held private co wants to remove the auditors before their tenure. They were appointed in last AGM for 5 years. Can u clarify the process of removal of auditors and appointment of other auditors for the FY 2014-15. Can they be removed and audit to be conducted by the new auditors for fY 2014-15.
I will be highly obliged.
Thanks in advance.
Akhilesh
if shareholders failed to appoint first auditor within 90 days then what is the provisions?
thanks for your help but in case of govt companies,is it required by the company to send intimation to auditors even when they are being appointed by the CAG ??
Hi,
The First auditor has been appointed by the Board of Directors in F. Y. 2013.
Can BOD proposes to members to change the auditors in the First AGM.
If AGM fails to appoint auditor what are the steps to be taken for compliance under co. act 2013?? (in co. act 1956 co will inform this thing to CG who in turn will appoint an auditor for the co.!! so what is the position in Co. act 2013 in this case?)
If auditor has been appointed for 1 year instead of 5 years can this be corrected in the next agm? or a new agm has to be convened to correct this anomaly?
what are condition for appointment of auditor by special resolution?
If auditor is not appointed in agm, can existing auditor said to be automatically reappointed?
Hii Divesh,
The exemption of small companies for appointing the auditors under 139(2) is there. But under 139(1), these companies have to appoint the auditor for a term of not less than of 5 years and after it these auditors may be appointed for further period of 5 years.
Kindly discuss, if you have any doubt.
Relevant section for appointment for appointment of first auditor is Sec 139(6) (instead of Sec 139(1) mentioned in the box.
Further adding to my comment, Form ADT1 in the present form does not seek details on the period/financial year to which the appointment relates. However Form GNL2 to which ADT1 is attached seeks information on the financial year. So pls give your views on the necessity to file Form ADT1 every year irrespective of the fact that the auditor is appointed for more than 1 yr.
The appointment of auditor can be for 5 years at a time in case of small companies and one person companies. The same auditor could get reappointed for every consecutive period of 5 yrs. The appointment though is approved in the first year by the shareholders, will need ratification in every AGM. Form ADT1 is to filed within 15 days of the appointment of statutory auditor. Should the form be filed every year ie subsequent to the appt in the 1st year and every year thereafter subsequent to the ratification by the shareholders?
Is there any certificate format to be issue by AUDITOR to the company as required u/s 139(1).