Information about Guide On Appointment of Auditor

The company is governed by two bodies: the shareholders and the directors. The shareholders are the true owner of the company who provides funds to the director of the company and in return, the directors of the company perform business operations from the funds that are accepted from the shareholders. Therefore, the Board is under an obligation to present the books of accounts of the company to the shareholders in the General Meeting; so that the shareholders can have a close look at where their funds are being utilized by the company, for the purpose the same the board of directors needs to appoint an independent person who is practicing Chartered accountant to conduct Statutory Audit. An auditor is a trained individual who reviews, checks, and verifies the correctness or genuineness of financial records maintained by companies. These individuals also help companies ensure that they comply with Indian tax laws and other applicable Acts and protect businesses from fraud. They also highlight discrepancies in the company’s financial statement and accounting methods and help maintain overall compliance. All the companies registered under the Companies Act, 2013 or any previous Company law, whether public Limited Company or Private Limited Company and whether having a share capital or not, are required to maintain proper books of accounts u/s 128 of the Companies Act, 2013. Companies have also to get their Books of accounts audited as required u/s 139 of the Act. The audit is an examination of accounting records undertaken to establish the correctness or genuineness of the transactions reflected therein. It involves intelligent scrutiny of the books of account of a Company concerning documents, vouchers, receipts, and other relevant records to ensure that the entries made therein give a true picture of the business. Hence, there is a need to appoint a Statutory Auditor. As per section 141(1) & (2) of the Companies Act, 2013, the Following person can be appointed as statutory auditor of the Company: A person shall be appointed as an auditor of a company only if he is a practicing-chartered accountant. A chartered Accountant firm shall be appointed as an auditor of a company only if the majority of partners practice chartered accountants in India. A limited liability partnership shall be appointed as an auditor of a company only if the partners who are practicing chartered accountants shall be authorized to act and sign on behalf of the firm. Chartered Accountant has been defined under section 2(17) of The Companies Act, 2013 as: “Chartered Accountant means a chartered accountant as defined in clause (b) of subsection (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice under sub-section (1) of section 6 of that Act” Clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 defines a chartered accountant as a person who is a member of the Institute. As per section 141(3) of the Companies Act, 2013, the following person shall not be eligible for appointment as statutory auditor of a company The term officer has been defined under 2(59) of the Companies Act, 2013, It includes any director, key managerial personnel or manager, or any person following whose directions the board of directors is accustomed to act. However relative may security or interest in the company of face value not more than Rs. 1000 or such sum as may be prescribed i.e Rs 1 Lakhs; The term “relative” has been defined under section 2(77) of the Companies Act, 2013 In the case of a private company, in counting twenty companies exclude OPC, dormant companies, small companies and private companies having paid-up share capital less than Rs. 100 crores.[Inserted vide notification dated 5th June 2015] The company shall obtain written consent and certificate from the proposed auditor that the appointment, shall be made following the conditions as prescribed under rule 4 of Companies (Audit and Auditors) Rules, 2014, as follow: The certificate shall prescribe that the auditor satisfies the criteria provided in section 141 of the Companies Act, 2013. The appointment of the first auditor can be divided under two broad headings The first auditor of a company shall be appointed by the Board of Directors of the company within 30 days from the date of incorporation of the company. If the Board fails to appoint such an auditor, it shall inform the members of the company and the members shall make the appointment within 90 days of information at an EGM. The first statutory auditor shall hold office till the conclusion of the first annual general meeting of the company. The first auditor shall be appointed by the Comptroller and Auditor-General of India (CAG) within 60 days from the date of incorporation of the company. If CAG fails to appoint the first auditor within the prescribed time, then the Board of Directors of the company shall appoint the first auditor within the next 30 days. If the Board of Directors of the company fails to appoint the first auditor within the prescribed time, then it shall inform members and members shall appoint the first auditor within 60 days of information at an EGM. The First statutory Auditor shall hold office till the conclusion of the first AGM. According to section 2(45) of the Act, Government company means any company in which not less than fifty-one percent of the paid-up share capital is held by- a) Central Government; or b) State Government or c) Partly by the Central Government and partly by one or more State Governments. ‘Government Company’ includes a company that is a subsidiary company of a Government Company. Appointment of a statutory auditor shall be made by members of the company at First AGM and every subsequent 6th AGM. Every company other than the Government company shall appoint an individual or a firm as an auditor at the first AGM and such auditor shall hold office from the conclusion of the 1st AGM till the conclusion of the 6th AGM. After the 1st AGM of the company, when the Auditor is being appointed at AGM, the auditor so appointed shall hold office till the conclusion of the 6th AGM, with the AGM wherein such appointment has been made is considered as the 1st AGM. At every AGM, the appointment of an auditor shall be ratified by the members of the company. If at any AGM, the appointment of the auditor is not ratified by the members, then the auditor has to vacate his office. The Board shall appoint another individual or firm as auditor of the company. Appointment or reappointment of auditor in case of Government Company shall be made by Comptroller and Auditor-General of India (CAG) within 180 days from the commencement of the financial year i.e. 1st April of each year. The statutory Auditor shall hold office till the conclusion of the AGM. Section 139 of the Companies Act, 2013 read with rule 5 of the Companies (Audit and Auditors) Rules, 2014 provides that the following class of companies shall not appoint/reappoint: An individual auditor or an audit firm that has completed the above term, shall not be eligible for re-appointment in the same company for five years from the completion of the above term. Note: If the proposed audit firm has a common partner or partners of a retiring audit firm, then such proposed audit firm shall not be appointed as auditor of the same company for five years. Onlinexbrl offer you complete assistance for appointnment of auditor, you can connect with us to know about the process to complete it further. Need For Statutory Audit
Who Can Be Appointed As Statutory Auditor Of The Company?
Individual:
Chartered Accountant firm:
Limited liability partnership:
Who Can Not Be Appointed As Statutory Auditor Of The Company?
Relaxation:
Conditions For Appointment Of Auditor
Appointment Of First Auditor
Appointment of the first auditor in every company other than the Government company
Appointment of the first auditor in the Government company.
Appointment Of Auditors At The Yearly General Meeting
Appointment of Subsequent Auditor in the company other than Government Company:
Appointment of Subsequent Auditor in case of Government Company:
Tenure Of Statutory Auditors
Cooling Period:
Class of company shall mean the following classes of companies: