Appointment of Auditor Under Companies Act 2013

Table of Contents:-

The appointment of auditor in a company is governed primarily by Sections 139 to 141 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014.

Every company is required to have a statutory auditor in accordance with the applicable provisions of the Companies Act. The procedure and authority for appointment may differ depending upon whether it is the first auditor, subsequent auditor, auditor appointed at an Annual General Meeting (AGM), auditor appointed to fill a casual vacancy, or auditor of a Government company.

Companies should also ensure that the proposed auditor satisfies the eligibility and independence requirements prescribed under the Companies Act before appointment.

Businesses looking for professional statutory audit support can refer to our Statutory Audit Services in India.

Legal Provisions for Appointment of Auditor

The principal provisions governing appointment and related matters include:

Section 139 – Appointment of auditors
Section 140 – Removal, resignation and special notice
Section 141 – Eligibility, qualifications and disqualifications
Section 142 – Remuneration of auditors
Section 144 – Certain services which an auditor cannot provide
Companies (Audit and Auditors) Rules, 2014

The official Companies Act, 2013 may be referred to for the statutory provisions.

Who Can Be Appointed as Statutory Auditor?

Under Section 141 of the Companies Act, 2013, a person is eligible for appointment as an auditor of a company only if the person is a Chartered Accountant.

A firm may also be appointed as auditor where the applicable statutory conditions are satisfied.

Where a firm, including an LLP, is appointed, only partners who are Chartered Accountants are authorised to act and sign on behalf of the firm.

The company should verify the auditor’s eligibility and absence of applicable disqualifications before appointment.

Appointment of First Auditor of a Non-Government Company

Section 139(6) deals with appointment of the first auditor of a company other than a Government company.

The Board of Directors should appoint the first auditor within 30 days from the date of registration of the company.

The first auditor holds office until the conclusion of the first Annual General Meeting.

If the Board fails to appoint the first auditor within the prescribed period, the members should be informed and the members shall appoint the first auditor at an Extraordinary General Meeting within the statutory period prescribed under Section 139(6).

Example

Suppose ABC Private Limited is incorporated on 1 August 2026.

The Board should appoint the first statutory auditor within the prescribed 30-day period.

The appointed first auditor will ordinarily continue until the conclusion of the company’s first AGM.

Is ADT-1 Required for Appointment of First Auditor?

This is an important practical question.

Form ADT-1 is prescribed as the notice by a company to the Registrar regarding appointment of auditor under Section 139 and Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014.

Companies should examine the applicable filing requirement for the particular nature of appointment and use the current MCA portal/forms while completing statutory filings.

The latest forms and filing facilities can be accessed through the Ministry of Corporate Affairs.

Documents Required Before Appointment of Auditor

Before proceeding with an auditor appointment, the company should ordinarily obtain relevant documentation from the proposed auditor.

These may include:

consent to act as auditor;
certificate regarding eligibility;
confirmation regarding applicable disqualifications;
membership number;
Firm Registration Number, where applicable;
PAN and other information required for MCA filing; and
details of previous tenure where auditor rotation provisions are applicable.

The exact documentation should be determined based on the type of appointment and applicable provisions.

Auditor’s Consent and Eligibility Certificate

Before appointment, the proposed auditor should provide written consent to act as statutory auditor and confirm eligibility for appointment under the Companies Act and applicable rules.

The company should ensure that the proposed appointment complies with:

Section 139;
Section 141;
applicable rules;
auditor rotation requirements, where applicable; and
limits on number of audits, where applicable.

Board Meeting for Appointment of First Auditor

For the first auditor of a non-Government company, the Board should consider and approve the appointment within the statutory period.

The Board Resolution should ordinarily record matters such as:

name of the auditor/audit firm;
membership number or Firm Registration Number;
term of appointment;
remuneration, where relevant; and
authority for completing necessary documentation and filings.

Appointment of Auditor at First AGM

After the tenure of the first auditor ends at the conclusion of the first AGM, the company appoints its statutory auditor in accordance with Section 139.

Under Section 139(1), the company appoints an auditor at its first AGM who ordinarily holds office from the conclusion of that AGM until the conclusion of the sixth AGM, subject to the Companies Act and applicable rotation provisions.

In practical terms, this generally represents a five-year tenure, subject to applicable legal requirements.

Appointment of Auditor at Subsequent AGM

Where appointment or reappointment is required, the company should ensure:

the proposed auditor is eligible;
applicable disqualifications do not exist;
rotation provisions have been considered;
Audit Committee recommendation is obtained where applicable;
Board recommendation is appropriately considered;
shareholders approve the appointment where required; and
prescribed ROC filing is completed.

Is Annual Ratification of Auditor Required?

The Companies Act originally contained a requirement relating to ratification of auditor appointment by members at every AGM.

However, this annual ratification requirement was subsequently removed.

Therefore, companies should not continue following outdated procedures requiring annual ratification merely because these appeared in older versions of the Companies Act or older articles.

This is one reason companies should verify current provisions before completing auditor-related compliance.

Appointment Through Audit Committee

Where a company is required to constitute an Audit Committee under Section 177, appointments of auditors, including filling of casual vacancies, are made after taking into account the recommendations of the Audit Committee.

Accordingly, the process may involve:

Audit Committee recommendation → Board consideration → Shareholder approval, where applicable → ROC filing.

Filing of Form ADT-1

Form ADT-1 is the prescribed notice of appointment of auditor by the company.

The form contains details such as:

CIN of company;
name and registered office;
nature of appointment;
category of auditor;
auditor’s PAN;
auditor/audit firm’s name;
membership number or Firm Registration Number;
auditor’s address;
email details;
tenure information; and
information relating to applicable statutory limits.

MCA’s prescribed form expressly identifies ADT-1 as the notice of appointment of auditor pursuant to Section 139 and Rule 4(2).

Time Limit for Filing ADT-1

For appointments for which Rule 4 applies, the company is required to inform the Registrar in the prescribed form within the applicable statutory period.

Companies should verify the current MCA form and filing requirements at the time of appointment because MCA forms and electronic filing procedures can change.

Practical Process for Appointment of Statutory Auditor

A typical appointment process may involve the following:

Step 1 – Identify the proposed auditor

Select an eligible Chartered Accountant or audit firm.

Step 2 – Obtain consent and eligibility certificate

Obtain written consent and confirmation regarding eligibility and disqualifications.

Step 3 – Audit Committee recommendation

Where an Audit Committee is applicable, obtain its recommendation.

Step 4 – Board Meeting

Place the proposed appointment before the Board.

Step 5 – Shareholder approval

Where required, place the appointment before members at the AGM or other applicable general meeting.

Step 6 – Issue appointment letter

Communicate the appointment formally to the auditor.

Step 7 – File ADT-1

Complete the applicable ROC filing within the prescribed period.

Step 8 – Maintain statutory records

Keep the consent, eligibility certificate, resolutions, appointment letter and ROC acknowledgement in the company’s records.

Appointment of Auditor in a Government Company

Different provisions apply to Government companies.

Under Section 139(7), the first auditor of a Government company or other specified Government-controlled company is appointed by the Comptroller and Auditor-General of India (C&AG) within 60 days from registration.

If the C&AG does not appoint the first auditor within that period, the Board gets the next 30 days to make the appointment.

If the Board also fails, the members appoint the auditor within the prescribed period at an Extraordinary General Meeting.

Subsequent Auditor of Government Company

For subsequent financial years, the C&AG appoints the auditor of the Government company in accordance with Section 139(5).

The appointment is required within the statutory period prescribed with reference to commencement of the financial year.

Government company auditor appointments should therefore be distinguished from ordinary private and public company appointments.

Auditor Rotation Under Section 139(2)

Certain prescribed classes of companies are subject to mandatory rotation of auditors.

Broadly, where Section 139(2) applies:

an individual auditor cannot ordinarily be appointed for more than one term of five consecutive years; and
an audit firm cannot ordinarily be appointed for more than two terms of five consecutive years,

subject to the detailed statutory provisions, transitional rules and cooling-off requirements.

Applicability should be checked carefully based on the category and prescribed thresholds applicable to the company.

Why Auditor Rotation Matters

Auditor rotation is intended to support auditor independence and reduce excessive familiarity arising from very long audit relationships.

Companies approaching the end of an auditor’s permitted tenure should therefore plan the replacement process before the AGM rather than waiting until the existing term expires.

Eligibility and Disqualification Under Section 141

Appointment should not be treated as merely an ROC filing exercise.

Before appointing an auditor, the company must determine whether the proposed auditor satisfies Section 141.

Section 141 contains several eligibility and disqualification conditions relating to matters such as:

professional qualification;
employment relationship with the company;
financial interests;
indebtedness;
guarantees;
business relationships;
relatives holding specified positions;
number of company audits;
fraud conviction; and
prohibited services.

The detailed statutory requirements can be reviewed in the Companies Act, 2013.

Limit on Number of Company Audits

Section 141 also contains restrictions concerning the number of companies for which a person can hold appointment as auditor.

Accordingly, the auditor’s eligibility confirmation should cover compliance with applicable audit limits before the company proceeds with appointment.

Casual Vacancy in the Office of Auditor

A casual vacancy may arise due to circumstances such as:

resignation;
death;
disqualification; or
other events resulting in vacancy.

For a company other than one whose auditor is appointed by the C&AG, Section 139(8) generally requires the Board to fill the casual vacancy within 30 days.

Where the casual vacancy arises because of the resignation of the auditor, the appointment must also be approved by the company at a general meeting convened within the prescribed period.

Casual Vacancy Due to Resignation

Where the existing statutory auditor resigns:

the resignation should be properly documented;
the outgoing auditor should comply with applicable filing requirements;
the company should initiate appointment of a replacement;
the Board considers the appointment;
shareholder approval is obtained where required; and
applicable ROC forms are filed.

The new auditor holds office for the period prescribed under the Act.

Resignation of Statutory Auditor

Section 140 contains provisions dealing with resignation of an auditor.

An auditor who resigns is required to file the prescribed statement within the statutory time period and provide the required reasons and other relevant facts.

Section 140 currently provides a 30-day period from resignation for the auditor’s filing obligation.

Removal of Auditor Before Expiry of Term

Removal of a statutory auditor before expiry of the term is different from ordinary replacement at the end of tenure.

Under Section 140, removal before expiry involves additional statutory requirements, including:

Board action;
prior approval of the Central Government in the prescribed manner;
special resolution of members; and
reasonable opportunity of being heard to the auditor.

Companies should obtain professional advice before initiating removal proceedings.

Reappointment of Retiring Auditor

A retiring auditor may be reappointed at the AGM subject to Section 139 and other applicable provisions, provided, among other matters:

the auditor is not disqualified;
the auditor has not expressed unwillingness to continue;
applicable rotation restrictions do not prevent reappointment; and
the company has not validly appointed another auditor or resolved otherwise.

Section 139 also addresses the position where an auditor is neither appointed nor reappointed at an AGM.

Auditor Remuneration

Section 142 deals with remuneration of auditors.

The company should ensure that auditor remuneration is determined by the appropriate authority in accordance with the Companies Act.

The engagement terms should also clearly identify the audit scope, reporting responsibilities and remuneration.

Appointment Letter to Statutory Auditor

After approval, the company should issue a formal appointment letter to the statutory auditor.

The letter may include:

company name;
nature of appointment;
relevant financial year;
tenure;
audit responsibilities;
remuneration;
reporting requirements; and
reference to the applicable resolution.

The auditor should retain appropriate appointment documentation as part of the engagement records.

Documents Commonly Required for ADT-1

Depending upon the current MCA form and nature of appointment, companies should keep relevant documents ready, which may include:

auditor’s consent;
eligibility certificate;
Board Resolution;
shareholder resolution, where applicable;
appointment/intimation letter; and
relevant auditor and audit firm particulars.

Always check the current MCA filing requirements before submission.

Appointment of Auditor vs Appointment of Internal Auditor

A statutory auditor and an internal auditor perform different functions.

The statutory auditor is appointed under Section 139 and conducts the statutory audit of financial statements.

Internal audit is governed principally by Section 138 for prescribed companies and focuses on matters such as:

risk management;
internal controls;
processes;
compliance; and
governance.

For detailed guidance on internal audit, see What Is Internal Audit? and our Internal Audit Services in India.

Appointment of Auditor for a Newly Incorporated Company

For a newly incorporated non-Government company, auditor appointment should be included in the company’s immediate post-incorporation compliance calendar.

The company should therefore coordinate with its Chartered Accountant or compliance adviser soon after incorporation so that the first auditor appointment is completed within the statutory timeline.

Foreign shareholders establishing an Indian subsidiary should pay particular attention to this because appointment of the first auditor is one of the early corporate compliances after incorporation.

Businesses setting up operations in India may also refer to our Company Registration in India Guide.

Common Mistakes in Appointment of Auditor

Companies should avoid mistakes such as:

missing the first auditor appointment timeline;
confusing statutory auditor with internal auditor;
not obtaining auditor consent;
not checking Section 141 eligibility;
ignoring auditor rotation requirements;
missing Audit Committee recommendation where applicable;
incorrect Board/shareholder approval;
delayed ADT-1 filing;
incorrect tenure mentioned in resolutions;
failing to properly address casual vacancy; and
using outdated statutory procedures.

Auditor Appointment Compliance Checklist

Before closing the auditor appointment process, verify:

correct type of appointment identified;
proposed auditor is eligible;
consent obtained;
eligibility certificate obtained;
rotation provisions checked;
Audit Committee recommendation obtained, if applicable;
Board approval completed;
shareholder approval completed, where applicable;
appointment letter issued;
ADT-1 requirement checked and filed where applicable;
ROC acknowledgement retained; and
statutory records updated.

Frequently Asked Questions

Who appoints the first auditor of a private limited company?

The Board of Directors ordinarily appoints the first auditor of a non-Government company within 30 days from registration under Section 139(6).

How long does the first auditor hold office?

The first auditor ordinarily holds office until the conclusion of the first Annual General Meeting.

Who appoints the statutory auditor at the first AGM?

The members appoint the statutory auditor at the first AGM in accordance with Section 139.

What is Form ADT-1?

ADT-1 is the prescribed notice of appointment of auditor filed by the company with the Registrar under the applicable provisions of Section 139 and the Companies (Audit and Auditors) Rules.

Is an auditor appointed every year?

An auditor appointed under Section 139(1) ordinarily holds office from the conclusion of the meeting at which the auditor is appointed until the conclusion of the sixth AGM, subject to applicable provisions including rotation.

Is annual ratification of auditor appointment required?

The earlier annual ratification requirement was removed. Companies should follow the current provisions rather than older compliance procedures.

Who can become the statutory auditor of a company?

A person must satisfy the qualification and eligibility requirements of Section 141. A Chartered Accountant or eligible audit firm may be appointed subject to the applicable statutory requirements.

Is ADT-1 filed by the company or auditor?

ADT-1 is the company’s notice to the Registrar regarding appointment of the auditor.

What happens if the statutory auditor resigns?

The resignation triggers requirements under Section 140, while the resulting casual vacancy is filled in accordance with Section 139(8).

Can an auditor be removed before completion of the term?

Yes, but removal before expiry of the auditor’s term is subject to the special procedure prescribed under Section 140, including applicable approvals.

Is appointment of internal auditor the same as statutory auditor?

No. Statutory auditor appointment is governed principally by Section 139, whereas internal audit requirements are principally covered under Section 138.

Statutory Audit Services in India

EzyBiz India Consulting LLP assists Indian and foreign-owned companies with audit and related corporate compliance requirements.

Companies requiring statutory audit support can explore our Statutory Audit Services in India.

For broader audit requirements, visit our Audit and Assurance Services in India.

Related Services

Authoritative References

Ministry of Corporate Affairs – Companies Act, 2013

MCA – Companies (Audit and Auditors) Rules, 2014 and Form ADT-1

These should be your main external authority links rather than linking to blogs or competing CA websites.

Prepared By: EzyBiz India Consulting LLP
Reviewed By: Anil Agrawal, Chartered Accountant
Last Updated: August 2026

Disclaimer

The information provided on this page is for general informational and educational purposes only and should not be construed as legal, audit, accounting or regulatory advice. The appointment, reappointment, rotation, resignation, removal and filing requirements relating to statutory auditors depend upon the type of company, nature of appointment and applicable provisions of the Companies Act, 2013 and rules in force at the relevant time. Companies should verify the latest MCA requirements and obtain appropriate professional advice before taking any action.

Appointment of Auditor in Company