With the introduction of the Companies Act, 2013, a lot of provisions were impacted with the changes made in the previous Companies Act, 1956. One such provision is the one related to the Appointment of Auditor in companies.
Appointment of First Auditor in the Non-Government Company:
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Usually, the first auditor of the company is to be appointed within 30 days of the incorporation or registration of the company in its Board Meeting. In case the company or the board fails to make an appointment of the auditor, then the same is to be intimated to all the members of the company. The members have to appoint an auditor within 90 days of such intimation in an extraordinary general meeting. The auditor is required to hold the office till the conclusion of the First ever Annual General Meeting of the company.
Appointment of Auditor in First Annual General Meeting and subsequent Annual General Meeting:
It is mandatory for all the different types of company registrations in India conduct the appointment of auditor either an individual or firm, in its first Annual General Meeting. The appointed auditor is required to hold the office till the 6th Annual General Meeting of the company is concluded. This implies that an auditor is appointed for a minimum period of five years in a row in the first AGM or in the subsequent AGM.
Appointment of Auditor in the Government Company:
The Comptroller & Auditor General of India has to appoint the first auditor of the Government Company within 60 days of the incorporation or registration of the company.
Appointment of Subsequent Auditor:
In respect of a financial year, it is the Comptroller & Auditor General of India, who conducts the appointment of auditor. This appointment is to be made within 180 days from the date of commencement of the fiscal year. The auditor is liable to hold the office till the Annual General Meeting for the fiscal year is concluded. Also, it is to be noted that the deemed Government Companies are not liable for the applicability of the provisions and laws related to appointment of auditor.
Process of Appointment of Auditor:
The process of appointment of Internal Auditor under Companies Act, 2013 in companies either government or non-government involves the following steps-
- A proposal letter is to be intimated or sent to the auditor.
- The auditor is required to provide an acceptance letter and his/ her eligibility certificate for the appointment.
- Wherever applicable, a meeting of the Audit Committee and the Board Meeting is to be conducted, where the recommendation related to the appointment of auditor is to be made in front of the shareholders at the Annual General Meeting (AGM).
- The company conducts an Annual General Meeting, where the resolution regarding the Appointment of Auditor is to be passed.
- Once the appointment is approved by the shareholders, a letter of appointment or engagement is sent to the auditor along with a true certified copy of the resolution passed in the AGM.
- Conduct Annual general Meeting and pass the Resolution for appointment of Auditor.