Appointment of Auditor
Any individual trained to review and verify accounting data and recognised as a Chartered Accountant (CA) under the Chartered Accountant Act, 1949 is deemed to be an auditor. Every company needs to appoint an auditor as per the provisions of the Companies Act, 2013.
Purpose for Appointment of Auditor
The purpose of the auditors in the company is to protect the interests of the shareholders. The auditor is obligated by law to examine the accounts maintained by the directors and inform them of the true financial position of the company. Auditor gives his independent opinion to the owners or shareholders of the company to protect and keep the company in a safe financial condition.
Appointment of an Auditor for Different Kinds of Companies
| Particulars | Non-Government Company | Listed/Specified Company | Government Company |
| Application for 1st Auditor post Incorporation | Appointed by the Board Of Directors. This has to be done within 30 days from the date of Registration. Appointment can also be done by Members at Extraordinary General Meeting within 90 days of information. | Appointed by Board Of Directors. This has to be done within 30 days from the date of Registration. Appointment can also be done by Members at Extraordinary General Meeting within 90 days of the information. | Appointed by the Comptroller and Auditor General of India. This has to be done within 60 days from the date of Registration. Appointment can also be done by Board Of Directors within 30 days of incorporation. Members can also appoint at an Extraordinary General Meeting within 60 days of Information. |
| Auditor at First AGM with the written consent and a certificate of Auditor. | The appointment is done by the members He will hold office till the end of the 6th Annual General Meeting (AGM). The appointment shall be in accordance with the conditions laid down by the auditor. | The appointment is done by the members for a maximum term of 5/10 consecutive years. Cooling off period of 5 years before next appointment will be there. | The appointment is done by the Comptroller and Auditor General of India. He should be appointed within 180 days from the 1st of April. |
| Appointment of Subsequent Auditor | The appointment is done by the members and he will hold office till the conclusion of the 6th meeting. | The appointment is done by the members for a Maximum term of 5/10 consecutive years. | The appointment is done by the Comptroller and Auditor General of India within 180 days from the 1st of April. |
| Casual Vacancy due to resignation and other reasons | The appointment is by the members within 3 months of the recommendations of Board and he will hold office till the next AGM. | The appointment is by the members within 3 months of the recommendations of Board and he will hold office till the next AGM. | The appointment is done by the Comptroller and Auditor General within 30 days. |
Appointment Of Auditor Other Than Retiring Auditor By A Special Notice
Where a person other than the retiring auditor is proposed to be appointed as an auditor, or where it is proposed that the retiring auditor shall not be re-appointed, a special notice under Section 115 of the companies Act, 2013 has to be given proposing that such a resolution would be moved at the next annual general meeting.
In case where the retiring auditor has completed a consecutive tenure of five years or, as the case may be, ten years then such special notice can be avoided. For the purpose of special notice the relevant points are as under:
- If the auditor makes a representation in writing to the company and requests for a notification to the members, the company shall-
- State the fact of representation in any notice regarding the resolution
- The copy of representation should be sent to those members by the company to whom notice of meeting is sent, whether before or after the receipt of representation.
- if the copy of representation is not so sent , copy thereof should be filed with the Registrar.
- On receipt of the special notice for removing the auditor, the company should send a copy of the same to the retiring auditor.
- Such representation should be of a reasonable length and not too long.
- The special notice should not be received by the company too late for the purpose of circulation to members.
- Auditor may require the company to read out the representation in the meeting if it is not notified to members because it was too late or because of company’s default.
If the Tribunal is satisfied that the rights are being abused by the auditor based on an application either of the company or of any other aggrieved person, then:
- the copy of the representation may not be sent, and
- the representation need not be read out at the meeting.
Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
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Quick Summary
An auditor is a Chartered Accountant who reviews accounting data, appointed under the Companies Act, 2013. Their purpose is to protect shareholders' interests by giving an independent opinion on the company's financial position. Appointment processes differ for Non-Government, Listed/Specified, and Government companies. Special procedures exist for appointing auditors other than retiring auditors.
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