Auditor plays a vital crucial character in the corporate Governance of the private limited company because on private limited companies, SEBI's LODR regulation 2015 is not applicable. Therefore, there is the only auditor who can access the records of the private limited companies and audit the same in true letter and spirit of laws. Auditor in the company is like a doctor who checks the financial health of the company.
Detail procedures for the auditor appointment have been prescribed under the companies Act including the filing of form and other formalities as mentioned therein. Individual who is Chartered Accountant or firm of chartered accountants can be appointed as auditors of the company. There is a bar on the number of years for which the auditor can be appointed which varies for the individual and the firm. As per companies act, the auditor has to be appointed at the annual general meeting for the period of 5 years or 10 years applicable for Individual or firm respectively. It can be construed that the auditor shall hold the office from the date conclusion of the AGM at which he is appointed till the 6th or 10th AGM of the company.
If the Auditor is appointed by the company, wherein there is requirement to constitute the audit committee, then qualification and experience of the proposed auditors shall be considered by the audit committee, but if the company is not required to set up the audit committee as per companies act then the boards of directors has the authority to consider the auditor appointment.
Taking into account the qualifications and other parameters, the said committee gives its recommendation to the board of directors about their eligibility
Appointment of the auditor as mentioned above is for 5 or 10 years as the case may be which is subject to the yearly confirmation of the shareholders. Under the companies Bill 2016, it has been proposed that requirement of ratification or confirmation on a yearly basis at the each AGM should be dispensed with.
There are some prerequisite documents and requirements which have to be checked and arranged before confirming the appointment of the auditors, which are as follows:
Persons mentioned below are not eligible to be appointed as auditor of the company: