Ask Our Expert!

Reasons of Appointment of Auditor in India

Appointment of Auditor

Appointment of Auditor is a necessary aspect for your company. It is one of the major factors to run a company seamlessly. 

According to the Chartered Accountant Act of 1949, an auditor is "any person qualified to review and verify accounting data and recognised as a Chartered Accountant (CA) under that Act." According to the Companies Act of 2013, all businesses must have an independent auditor.

Reasons For Appointment Of Auditor

Safeguarding shareholder value is the primary responsibility of the Company's auditors. 

The Auditor's job is to verify the accuracy of the records the Company's management keeps and report those findings to the Board of directors. The Auditor's objective report helps the Company's shareholders make informed decisions about the Company's finances.

The Appointment of Auditor To Replace The Outgoing One, As Mentioned In A Separate Announcement

There must be a specific notice under Section 115 of the Companies Act 2013 proposing a resolution to appoint an auditor other than the departing Auditor or to recommend that the retiring Auditor shall not be reappointed at the next annual general meeting.

It is unnecessary to give extra notice if the retiring Auditor has served for at least five years in a row, sometimes even ten. The following items warrant extra attention and are hence meriting of such:

If the Auditor makes a written assertion to the corporation and demands that the shareholders be informed, the corporation shall-

Include the representation fact in any resolution-related notice you send.

Company shall mail a copy of the representation to each member to whom notice of the meeting is provided, whether before or after the Company receives the representation.

Even if a copy of the representation is mailed to the Registrar, a copy must also be lodged with the Registrar.

The corporation should provide a copy of the special notice for the removal of the Auditor to the outgoing Appointment of Auditor as soon as it receives it.

Any such presentation ought to be just the right length.

The special notice must arrive at the Company in time to be distributed to members.

If the Auditor determines that the firm either failed to notify its shareholders timely or was in default, it may be required to read the representation aloud at the meeting.

A copy of the representation need not be sent, and the representation need not be read out at the meeting if the Tribunal is convinced that the Auditor is abusing the rights based on an application by the firm or any other aggrieved person.

How You Can Opt For Appointment Of Auditor? 

Any business with legal status equivalent to a limited liability company, limited partnership, or limited liability sole proprietorship is legally obligated to keep accurate financial records and have them audited at least annually. 

Accordingly, following corporate formation, the Company's Board of Directors must select an Audit Committee and designate an Auditor. 

If the Directors do not designate the first auditors of the Company within 30 days of the registration date, the shareholders must do so within 90 days of the Company's establishment. 

In this piece, we examine what is needed to appoint an auditor and the steps involved in doing so.

Documents Required from Appointment Of Auditor

When appointing a new auditor, the corporation must submit the documentation below.

Please provide Form MGT-14 and a copy of the board meeting resolution.

Submit an Application for Designated Trademark Use (Form ADT-1) to the Registrar of Companies (ROC).

The ROC also requires submitting the following materials and the forms mentioned above.

Identify the new accounting firm by name.

The new Auditor's mailing address.

The email and social security number are required.

The period the firm has been chosen to work.

Provides information about the auditing company that has resigned

The day on which the new auditing firm will take office.

Form ADT-1 with digital signature (along with the signature of the director of the Company).

Process of Appointment of Auditor

An Auditor of a Company must be a practising Chartered Accountant. Obtaining the Auditor's written consent and a certificate of appointment of an auditor, if made, will be in compliance with the Auditor's prescribed conditions and that the Auditor meets the criteria stated in Section 141 of the Companies Act 2013 is required before appointing an auditor of a company (Provision relating to audit and Auditor)

File ADT-1 is not required for the initial auditor appointment. The Company's Board of Directors can appoint an auditor by passing a resolution after receiving the Auditor's approval. Within fifteen days after the Auditor's appointment, word must be sent to the Registrar of Companies. 

From the close of that meeting until the close of the sixth annual general meeting, the first Auditor can serve. On the other hand, the corporation should put the issue of the nomination of an auditor before the shareholders at each annual general meeting for approval.

Nomination Of An Original Auditor

Suppose the Audit Committee recommends that the Board of Directors send back the matter of appointing an auditor to the Company's shareholders for further consideration. In that case, the Board of Directors considers the Audit Committee's suggestion. The Board would document the audit committee's disagreement and forward its recommendation to the Company's shareholders if the committee declined to rethink its original proposal.

Auditor General of India and Comptroller shall appoint the first Auditor of a Government Company within 60 days of the date of registration of the Company; provided, however, that if the Auditor General of India and Comptroller shall fail to make such appointment within the said term period. 

The Board of Directors of the Company shall make such Appointment of Auditor within the next 30 days. The initial Auditor's term of office may be extended through the close of the AGM held the following year.

Alternate Accountability Verifier

The shareholders must appoint all subsequent auditors at the annual general meeting. The Auditor elected at the annual meeting assumes their duties immediately following the close of the meeting at which they are elected.

However, in cases when a sudden vacancy occurs in the position of Auditor because of registration, members' approval must be acquired within three months of the date of the Board's recommendation.

Such an Appointment of Auditor may serve till the next annual general meeting is over. The Company must submit Form ADT-1 within 15 days of selecting an auditor to serve as the successor.

Not Having an Auditor On Staff

If the Board of Directors does not appoint an auditor within 30 days of the Company's incorporation, the Board must notify the members of the Company of this omission. An auditor would be appointed by the members in an extraordinary general meeting held within 90 days and would serve until the end of the first annual general meeting.

If no auditor is elected or re-elected at an annual general meeting, the Company's current Auditor will serve in that capacity for the ensuing year.

Auditor Selection for Publicly Traded Firm

Compared to an auditor's appointment for a private firm, the requirements for a publicly traded company are stricter. In this regard, a listed business may only reappoint the same person to the position of Auditor for up to five years in a row. Furthermore, audit firms can only serve as publicly traded corporations' auditors for up to two separate five-year mandates.

Roles & Responsibility After Appointment Of Auditor

It should be noted that the Company is responsible for keeping financial records and preparing financial statements. 

The Company's financial statements must have been audited by an independent auditor who was hired to provide an opinion on whether or not. 

The financial statements were free of material misstatements, fraud, or mistakes and were prepared following Accounting Standards. 

Due to conflicts of interest, the Company's Auditor is prohibited from also serving as the Company's Bookkeeper or preparing the Company's financial statements.

Removal of Auditor Process

At the outset, the Auditor must give the company notice of resignation and provide a declaration in the form of an ADT-3. Within 30 days following the resignation, this letter would be submitted to the RoC.


Online XBRL is the foremost platform that gives best results for Appointment of Auditor. So Connect with us now.