Auditor| Appointment, Qualification and Disqualification

  • July 12, 2016
  • Dushyant Sharma
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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.

How appointment of the Auditor is made?

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

Conditions for auditor appointment:

There are some conditions which have to be checked before confirming the appointment of the auditor, which are as follows:

  1. The proposed auditor shall submit a certificate with respect to the following points:
  2. The individual or firm is eligible for the appointment and is not disqualified under the Act, the chartered Accountant of India;
  3. The proposed appointment shall be as per the term of the Act;
  4. The proposed appointment is within the limit a prescribed by the Act;
  5. 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 be appointed as auditor of the company:

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:

  1. A body corporate except LLP;
  2. An officer or employee of the company;
  3. Any partner or employee of 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 who is in full time employment elsewhere.


Also read:  Insurance Marketing Firm: Principal Officer Eligibility Criteria

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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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