Auditor Appointment Compliance for Companies

MEANING:

Every company registered under the Companies Act, 2013 whether a Private Limited Company, One Person Company (OPC), or Limited Company is legally required to maintain proper books of accounts and have them audited annually by a qualified Chartered Accountant. To ensure this, an auditor must be appointed soon after incorporation.
The Board of Directors is responsible for appointing the first auditor within 30 days from the date of registration.
If the Board fails to do so, the shareholders can appoint the first auditor within 90 days from the company’s incorporation. The appointment process ensures financial transparency, compliance, and accuracy in the company’s financial reporting.

ELIGIBILITY AND CONSENT

Only a practising Chartered Accountant or a firm of Chartered Accountants can be appointed as a company’s auditor.

Before appointment, the following must be obtained:

1. Written consent from the auditor confirming willingness to act.
2. A certificate from the auditor confirming that:

• The appointment complies with the prescribed conditions under the Companies Act, 2013.
• The auditor meets the eligibility criteria specified under Section 141 (relating to audit and auditors).

APPOINTMENT OF FIRST AUDITOR

• The Board of Directors considers the recommendation of the Audit Committee (if any).
• If the Audit Committee recommends an auditor, the Board sends this recommendation to the members for approval.
• If the Board disagrees, it records its reasons and sends its own recommendation to the members.

For Government Companies

• The Comptroller and Auditor General (C&AG) of India appoint the first auditor within 60 days of incorporation.
• If C&AG does not make an appointment within 60 days, the Board of Directors must appoint an auditor within the next 30 days.
• The appointed auditor holds office until the conclusion of the first AGM.

APPOINTMENT OF SUBSEQUENT AUDITORS

• After the first AGM, the members of the company appoint the auditor.
• The appointed auditor holds office from the conclusion of that AGM until the conclusion of the sixth AGM.
• For every subsequent appointment, Form ADT-1 must be filed within 15 days of the appointment.

Casual Vacancy

If a casual vacancy occurs due to resignation or other reasons:

• The Board of Directors fills the vacancy within 30 days.
• The appointment must be approved by shareholders within 3 months at a general meeting.
• The newly appointed auditor holds office until the next AGM.

FAILURE TO APPOINT AUDITOR

If the Board fails to appoint an auditor within 30 days of incorporation, the matter must be informed to the members.
The members can then appoint an auditor within 90 days at an Extraordinary General Meeting (EGM).
That auditor holds office until the conclusion of the first AGM.

If no auditor is appointed or reappointed at an AGM, the existing auditor continues in office until a new appointment is made.