An Auditor, in simple terms, can be defined as an individual who has been trained to review and verify accounting data and has been recognized as a Chartered Accountant as per the Chartered Accountants Act, 1949. They hold the responsibility to review and evaluate the reliability and validity of the financial statements of a company. For this, they would scrutinize the Company’s books of accounts in reference to relevant documents, vouchers, and other pertinent documents to ensure that the entries made therein provide a reliable and valid view of the business and its transactions.
Appointment of Auditor
Every Company at its first AGM appoints an independent firm as its Auditor. Before such appointment, it is mandatory to obtain from the Company the written consent of the Auditor with respect to such appointment, and a certificate from him stating that such appointment of him as an auditor of the Company shall be in accordance with the Companies Act as prescribed under the same with regard to the same.
Appointment of Auditor by a Company other than a Government Company
First Auditor
As per section 139(6), the first Auditor of a company (other than the Government Company) shall be appointed by the Board of Directors within 30 days from the date of registration of the Company.
In the event that the Board of Directors of DiCompany fails to appoint an auditor, the Directors will notify the members of the Company accordingly.
The members of the Company should then, within the Company, appoint such an auditor at an extraordinary general meeting. Such an auditor shall hold the office from the conclusion of the EGM (in which the Auditor was appointed) up to the conclusion of the first AGM.
The Company shall communicate this appointment in advance, so that it is the shareholders’ responsibility to determine the remuneration of the Auditor at the EGM, or this responsibility may be delegated to the Board of Directors. Along with the remuneration, the reimbursement of any expenses incurred by the Auditor with respect to the Auditor’s expenses that the Auditor incurred on behalf of the Company should be reimbursed.
SubseCompanyuditor
The appointments made by the AGM, as well as the audit M, were ineffective until the conclusion of the 6th AGM, i.e., for the next 5 years, subject to ratification by every member at every AGM.
Appointment of AudCompany Government Company
First Auditor
A Government Company is a company which is owned or controlled, directly or indirectly, by the Central Government or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments. The following would be the manner in which such an appointment shall be made.
Appointment by CAG
In the case of a Government Company, the appointment of the first Auditor made by the Auditor General and the appointment by the AG shall be made within 60 days from the date of incorporation. This shall be then notified in the meeting of the Board of Directors, held immediately after the appointment. And this appointment shall be intimated to the Auditor of the Auditor as well.
The Board of Directors shall then fix the remuneration of the Company, and a board member of the Company in a board Meeting shall make the appointment of this Auditor.
In case of failure of CAG
If the CAG fails to appoint such auditors for the Government Company within said 60 days, then the Board of Directors of the company shall appoint the auditor within the next 30 days.
In case of the failure of the Board of Directors
If the Board of Directors fails to appoint the auditors within the specified 30-day period, the Board shall notify the Company accordingly. In that case, they shall make such an appointment within 60 days at the extraordinary general meeting, which shall then hold the office until the conclusion of the first AGM.
It is to be noted that there is a total of 90 days (60+30 days for the CAGAG and Board to appoint the first Auditor). The 60-day period commences immediately from the date on which the Board notifies the Company of its non-appointment or failure to appoint an auditor.
Subsequent Auditors
The CAG of Companyhall appoints auditors within 80 days from the commencement of the Financial Year, and such auditor shall hold the office until the conclusion of the AGM.
Appointment of Auditor in case of a Casual Vacancy
A casual vacancy in the office of an auditor arises due to;
– Death,
-vacancy gets disqualified as per section 141 of the Companies Act, and it shall be treated as a casual vacancy.,
– A ratification resolution fails at AGM, which shall be counted as arising from a casual vacancy.
Other than the Government Company
In the case of a company other than a Government Company, the Board shall fill the vacancy vacancy30 days after the vacancy arises from such casual vacancy. However, suppose such a casual vacancy has arisen as a result of the vacancy. In that case, the appointment shall also be approved by the Company at a company meeting convened within the period specified in the recommendation made by the Board. Such an Auditor shall hold the office until the next annual general meeting.
This shall be filed with the ROC or Registrar of Companies within 15 days of such appointment.
Government Company
In the event of a casual vacancy arising in the office of an auditor in a Government Company, the same shall be filled by the Company if it disagrees with the appointment. If there is a vacancy, then the Board of Directors shall fill this position within the next 30 days.
S,r. X, who initially interviewed for the vacancy at ABC Limited, accepted the offer on 30 September. They resigned on 31 October 2020 due to specific personal reasons, creating a casual vacancy. The Board can now fill such a vacancy by appointing Mr. Y by passing an ordinary resolution at a general meeting, which must be convened by the Board within three months, following the recommendation of the Board. The Band Shall Remain in office until the conclusion of the next AGM.
Re-appointment of a Retiring Auditor
- A retiring auditor may be re-appointed by the Company if;
- i) he is not dismissed for appointment,
- ii) If he has not given a written notice stating his unwillingness to be Company-Integrated at the AGM, and no auditor is appointed or re-appointed, then the existing auditor shall continue as Audit Director of every Company
- In the case of any list of names to the Company of a class as may be prescribed, the company shall appoint or re-appoint:
(i) an auditor as auditor for not 5 years from the date of appointment, and shall nott be eligible for re-appointment for a term of 5 years from the completion of his term; and
(ii) an audit firm as an auditor for not more than two terms of five consecutive years, and shall not be eligible for re-appointment for a term of 10 years from the completion of their term.
- It should also be noted that on the date of appointment, the audit firm, a common partner or partners, together with a company’s tenure has expired in a company, immediately, in the same financial year, shall be apAuditor as auditor of the same company forCompany of five years—Then next auditors nare those who would initially audit the rest ofthe icrucialperiod. TTperiodica public year increases the reliability of the information and enhances our confidence in the company and its financials. The role of an Auditor is essential.
