Appointment of First Auditor – As Per Companies ACT, 2013
Companies Act

Appointment of First Auditor – As Per Companies ACT, 2013 in Non-Government Companies

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  Posted on November 24, 2021

Appointment of First Auditor – As Per Companies ACT, 2013 in Non-Government Companies

In the case of a Government Company, the total paid-up capital will be owned by one or more governments and this should be 51% or more, while the major shareholding of the paid-up capital will be with the private individual in the case of a non-government company.

Appointment of First Auditor

As per section 139(6) of the Companies Act, 2013 the first auditor of a company which is a non-government company should be appointed by the Board of Directors within 30 days computed from the date of incorporation or registration of the company.

And in case of failure on the part of the Board of Directors to appoint the auditor, it shall inform the members of the company, who shall then within a period of 90 days from such informing, at an extraordinary general meeting appoint such auditor. Such an auditor who was appointed shall hold the office of the auditor till the conclusion of the first AGM.

Procedure for Appointment of First Auditor

Board of Directors in the Board Meeting Appoint the Auditor

  1. Obtain a written consent certificate from the auditor who is proposed for the appointment and this certificate should certify that:

– The auditor is eligible for appointment and is not disqualified for appointment as per the provisions of the Companies Act or the Chartered Accountants Act, along with the reading of relevant Rules and Regulations made thereunder.

– The proposed appointment is as per the term and limit laid down by the Companies Act.

– The list of proceedings pending against the auditor or the audit firm or any partner of such audit firm with respect to any conduct with regard to professional matters, which is disclosed in the certificate is true and correct.

  1. Now in case of a company which is mandated to constitute an audit committee as per section 177, then such committee and in case of any other company, the Board shall take into consideration the qualification and experience which should be held by the individual or firm of auditors for being appointed as the auditor of the company. They shall also consider the details of any pending procedures with respect to the conduct of the auditor before the court or ICAI (Institute of Chartered Accountants of India) or such other competent authority.

iii. Notice shall be issued at least 7 days before date of meeting of the Board, to every director of the company at the address which is registered by him with the company. And a Board Meeting shall be called within 30 days which is computed from the date of incorporation of the company majorly for appointing the first auditor of the company.

  1. The Board Resolution shall be passed for appointing the auditor and also fixing the remuneration of the first auditor, who shall hold the office of the auditor until the conclusion of the first AGM.

The remuneration which is fixed by the first auditors shall include any additional payments like expenses which were incurred by the auditor in connection with the audit of the company and any facility extended to him but would not include the remuneration paid to him for service rendered by him on request of the company.

  1. The Board shall now file an e-form ADT-1 within 15 days of the board meeting such appointment and also inform the same to such auditors. The following shall be attached with such form:

– A true copy which should be of the Certified Board Resolution for Appointment of First Auditor

– The copy of the Intimation Letter given by the Company to Auditor

– Consent Letter issued by Auditor to Company.

Members Appointing the First Auditor in an Extraordinary General Meeting

As per section 139(6) of the Companies Act, provides that if the Board fails to appoint auditors within 30 days from the date of incorporation of the company, it shall inform the members who shall then appoint the auditor within 90 days from such date of informing. And the procedure for this shall include:

  1. Send a notice of the general meeting to all shareholders, directors, auditors, and other persons at least 21 days before the date of such meeting.
  2. Hold shareholders meeting on the date which was determined earlier, so as to pass the Ordinary Resolution for the appointment of the first auditor of the company. Such auditor shall hold the office till the conclusion of the first AGM which shall be held every year after incorporation of the company. Along with this the approval for the remuneration that would be paid shall also be made.

iii. Now the same shall be intimated to the auditor and the ROC (Registrar of Companies) by filing form ADT-1 within 15 days from the date of general meeting and passing of the resolution, along with the attachments which were stipulated before, say:

– A true copy which should be of the Certified Board Resolution for Appointment of First Auditor

– The copy of the Intimation Letter given by the Company to Auditor

Consent Letter issued by Auditor to Company.

Now on the conclusion of the first AGM, the same auditor or a different auditor shall be appointed as the auditors of the company and such auditor shall hold the office until the conclusion of the sixth AGM which means for a period of 5 years.

 

 

 

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