APPOINTMENT OF AUDITOR

Introduction

Every entity in charge of the business is expected to conduct an audit on a daily, weekly, monthly, half-yearly, or annual basis. The Company must conduct an audit to determine its financial soundness, as well as to verify the Annual Accounts, Risk Policy, Compliance, and other regulations that apply to it. As per section 139 of the Companies Act, 2013 first auditor needs to be appointed within 30 days of its incorporation. In this article, there will be detailed information related to the procedure for the appointment of an auditor, procedure for the appointment of the First Auditor for a Company.

Purpose of an Auditor in a Company

An Auditor’s role in a company is to safeguard the interest of shareholders in a company. The auditor is required by law to analyze the accounts kept by the directors and to tell them of the company’s true financial status. The auditor will reveal the true financial position of a company, which will help investors, shareholders, and stakeholders of a company, along with that it will help directors in making future decisions related to the company.

Appointment of an Auditor under Companies Act, 2013

The First Auditor of a business other than a government business must be appointed by the Board within 30 days of its incorporation, according to section 139 of Companies Act, 2013. In the event that the Board fails, an EGM (Extraordinary General Meeting) must be called within 90 days to appoint the First Auditor. The 90-day limit begins on the day of incorporation rather than the expiration of the 30-day period.

Form ADT needs to file at the time of the First Auditor Appointment in a company. Once the authorization of an Auditor has been obtained, the Board of Directors of the Company can execute a resolution to appoint the Auditor. The auditor’s appointment must be reported to the Registrar of Companies within 15 days of her or his appointment. From the conclusion of that meeting until the conclusion of the company’s sixth AGM (Annual General Meeting), the first auditor can serve. The corporation should, however, put the question of an auditor’s appointment up for ratification by members at each Annual General Meeting (AGM).

Different types of Auditor appointed in a Company

• First Auditor
• Internal Auditor
• Subsequent Appointment of Auditor
• Secretarial Auditor
• Cost Auditor

Procedure for appointment of First Auditor

The auditor in this position will serve until the end of the first Annual General Meeting. The company must submit Form ADT-1 to the Registrar of Companies, together with the requisite payments.

If it is a Public Listed Company, then, in that case, the first auditor will be appointed by the auditor general of India and comptroller within 60 days of the Company’s incorporation date, and if the Comptroller General of India does not appoint such auditor within the said period of time, the Company’s Board of Directors shall appoint such auditor within the next thirty days, and if the Board fails to appoint such auditor within the next thirty days, the Company shall be dissolved. The First Auditor will hold the position until the First Annual General Meeting concludes.

Procedure for appointment of an auditor other than First Auditor

The members of the company must appoint auditors (other than the first auditors) in a general meeting. The auditor appointed at the general meeting takes office immediately after the meeting, and the existing meeting will be considered as the first auditor meeting for the newly appointed auditor.

However, if a casual vacancy in the office of an auditor arises as a result of registration, the consent of members must be acquired within three months of the Board’s recommendation date. The auditor appointed in the meeting will continue his or her work till the next Annual General Meeting. It is required for the Company to file ADT-1 within 15 days of appointing the subsequent auditor.

Documents required for appointing a new auditor for a Company

Following are the forms that need to be filed by the company at the time of appointing an auditor for a company

• At the time of the First Auditor Appointment, submit Form MGT-14 together with proof of the resolution.
• Form ADT-1 needs to be filed with the ROC (Registrar of Companies)

In addition to the foregoing forms, the ROC requires the following information

• The new auditing firm’s name.
• The new auditing firm’s address.
• PAN Number and email address
• The length of time for which the firm has been hired.
• Information about the resigned auditing firm.
• The new auditor firm’s appointment date.
• Form ADT-1, digitally signed (along with the signature of the director of the company).

Conclusion

The Auditor is appointed in the companies under section 139 of the Companies Act, 2013. The provisions governing the appointment of an auditor for a Public Business are more strict than those governing the appointment of an auditor for a Private Firm. A listed business, for example, cannot select an individual as an auditor for more than five years in a row. In addition, an audit firm cannot serve as the auditor of a publicly listed company for more than two terms, that is five consecutive years.