The Appointing authority for Auditors in a company is pursuant to section 139(1) of companies Act, 2013. As per the rule of the Act every company must appoint an individual or a firm as an auditor at the First General meeting of the company and the auditor will hold the company till the conclusion of every sixth general meeting. An Auditor is an individual who is recognised as a Chartered Accountant (CA) to review and verify the accounting books of the company.
Purpose of Appointing an Auditor:
The Protection of the Interests of the shareholders is the main purpose for appointing an Auditor in a company. The auditor is committed by law to verify the accounts maintained in the account books of the company by the directors and convey about the true financial position of the company. Auditors have the authority to give their individual opinion and can be an advisory team to support the shareholders of the company to safeguard and protect their financial conditions.
Procedure for appointment of Auditor:
- Make sure the Proposed Auditor or Auditors are eligible to be appointed as auditor of the company under the Chartered Accountants Act,1949 and Rules and Regulations made thereunder.
- Obtain consent letter from the auditor & certificate of qualification of the auditor.
- Fix the time, Date and Venue and call for General meeting.
- Conduct the General meeting and approve the Resolution of Appointment of Auditor
- The appointment of auditor/ auditors at the first general Meeting.
- The Auditor should be intimated about the appointment and form ADT-1 must be filed with Registrar of Company within 15 days of the meeting.
Conditions for appointment:
- An Individual or a Firm is eligible for appointed as Auditor(s) of a company if it qualifies under Chartered Accountant Act, 1949 and the rules and regulation made under it.
- The Proposed appointment must be made as per the terms provided by provision of section 139 of company Act,2013.
- The consent of the auditor must be taken before the appointment processed in the company.
- The list of proceedings against the auditor or the firm or any of the partners of the audit firm pending with respect to the professional matters of conduct must be disclosed in the certificate.
Eligibility of Auditor to be appointed [section 141 (1) & (2)]:
- An individual who is a Chartered Accountant or a firm with majority of partners practicing in India are Chartered Accountants can be appointed as Auditors.
- A firm including a LLP can be appointed as an auditor of a company, only if the Partners are authorized Chartered Accountants
Rotation of Auditors on Expiry of their Terms [section 139(4)]:
- The Audit Committee can recommend the Board of directors about the name of an Auditor od Audit firm who may replace the incumbent on expiry of the term of such incumbent.
- In case of no Audit Committee, the company must constitute an Audit Committee and the board can consider the recommendation of such committee and in other case the board itself shall consider the matter of Rotation of auditor or Audit firm and make its recommendation for appointment of next auditor by the member in annual general meeting.
Re-appointment of Retiring Auditor [section 139(9)]
A retiring auditor can be re-appointed as auditor in any Annual general meeting except under following circumstances.
- If he is not qualified for re-appointment
- If he gives his unwillingness notice to be re-appointed
- A special resolution passed about the replacement of the auditor or expressed that retiring auditor cannot be re-appointed.
In case of no auditor is replaced by re-appointment the exiting auditor could continue to be the auditor of the company under section 139 (10)
Casual Vacancy of Auditor [section 139 (8)]
The board of directors has the authority to fill the casual vacancy of the auditor in his office within 30 days.
The casual Vacancy may occur due to Resignation of Auditor and thus the appointment of auditor in the place of vacancy should be approved by the company in general meeting convened within 3 months of the recommendation of the board and further the auditor appointed will hold the office till the conclusion of next annual general meeting
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