Auditor plays a vital role in the corporate Governance in region of the world. Auditor in the company is like a doctor who checks the financial health of the company.
Auditor appointment in the company is governed by the Companies Act, 2013. Auditor can be an Individual or firm. There is different time period prescribed for their appointment. The Act states that every company must appoint its auditor in the AGM for a period of five years. It means that the auditor shall hole the office from the date conclusion of the AGM till the 6th AGM of the company.
If the Auditor is appointed in the company, which is required to set up audit committee, then such committee will consider the qualification and experience of the proposed auditor whereas a company is not required to set up the audit committee then Board of directors shall consider the above mentioned parameter of the proposed auditor.
After considering the qualification and other parameters, the audit committee recommends the auditor appointment to the board of directors and in cases where such a committee is not required to be set up, the board of directors shall recommend the name of proposed auditor to the shareholders in the AGM.
Though the auditor is appointed for the period of 5 years but such appointment is ratified by the shareholder at the AGM
There are some conditions which have to be checked before confirming the appointment of the auditor, which are as follows:
Auditing of the company is not a child play. Because of importance of the audit, only a person who is a Chartered Accountant or a firm of where majority of partners are chartered accountant can be appointed as auditor of the company.
Who can not be appointed as Auditor of the Company:
Following are the category of the persons who are not eligible to be appointed aa s auditor of the company:
Also read: Insurance Marketing Firm: Principal Officer Eligibility Criteria