Appointment of the Auditor

  • August 03, 2022
  • Dushyant Sharma
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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.

Appointment of the Auditor

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.

Terms & Conditions for auditor appointment:

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:

  • Submission of a certificate by the auditors with respect to the following points:
  1. The individual or firm is eligible for the appointment and is not disqualified under the Act, the chartered Accountant of India.
  2. The proposed appointment shall be as per the term of the Act.
  • The proposed appointment is within the limit a prescribed by the Act:
    1. The company shall also inform the appointment of the auditor to the ROC in form ADT-1 within 15 days of the meeting in which the auditor is appointed.

Who can not be appointed as Auditor of the Company:

Persons mentioned below are not eligible to be appointed as auditor of the company:

  1. A body corporate except LLP;
  2. Company's employee or officer;
  3. Any partner or employee or officer or employee of company;
  4. A person who himself or his relative or partner is holding any shares in the company or any other company which its holding or subsidiary company;
  5. A person who or whose relative or partner is indebted to the company or its subsidiary or its holding or associate company or a subsidiary of such holding company, in excess of rupees five lakh shall not be eligible for appointment.
  6. A person who is auditor of more than 20 companies.
  7. A person in full-time employment.

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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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