• Pratham Dave

SECTION: 139 APPOINTMENT OF AUDITORS

Updated: May 11


INTRODUCTION:


The appointment of auditors is mandated by numerous legislations. The law under which we designate specifies the procedure for appointing auditors as well as the auditor's rights, obligations, and activities. An auditor must be objective. In this section, we will go over how to appoint an auditor in accordance with the terms of the Companies Act of 2013.


APPOINTMENT OF AUDITORS:


The Board of Directors of a company other than a government entity must appoint an individual or a firm as the company's initial auditor within thirty days of its registration. The appointment of the very first auditor must be approved by the members at the company's first annual general meeting.


The company's first auditor functions from the end of the first annual general meeting until the conclusion of the sixth annual general meeting, and thereafter until the conclusion of each subsequent sixth meeting. The nomination of auditors, on the other hand, is ratified by the company's members at each annual general meeting.


However, if the Board of Directors fails to designate the firm's initial auditors, they must notify the members of the company. Thus, the members must appoint the company's first auditors in an executive general meeting within ninety days. The auditor so designated will serve until the end of the first AGM.


Any casual vacancy in the office of an auditor of a company other than a government-owned company must be filled within thirty days by the Board of Directors. This excludes any temporary vacancy caused by the resignation of an auditor. However, if a casual vacancy occurs as a result of an auditor's resignation, the Board of Directors must replace the position within thirty days. However, within three months of the Board's suggestion, the corporation must ratify this appointment at a public meeting. The office of such an auditor shall also be held until the end of the next annual general meeting.


PROCEDURE FOR APPOINTMENT OF AUDITOR:


  • Inform the suggested auditor(s) of your desire to appoint him/her as an auditor and inquire whether he/she is competent and not disqualified to be appointed as the company's auditor.

  • Obtain the auditor's consent and certificate.

  • If an audit committee is needed to be formed pursuant to Section 177, acquire its recommendation (Section 139(11)).

  • Schedule a Board meeting.

  • At the first Board meeting, approve the employment of an auditor.

  • Inform the auditor and file form ADT-1 with ROC (must be attached to form GNL-2 as per MCA circular 09/2014 dated April 25, 2014) before 15 days.


RE-APPOINTMENT OF RETIRING AUDITOR


At the company's annual general meeting, members may re-appoint the retiring order:

  • If he is not barred for re-appointment.

  • If he has not given the corporation written notice of his reluctance to be re-appointed.

  • When the participants of such meeting do not approve a specific resolution selecting another auditor or expressly stating that he should not be re-appointed.

  • if the members do not select or re-appoint any auditors at any annual general meeting, the current auditor will continue to be the company's auditor.


APPOINTMENT OF AUDITORS OF GOVT. COMPANIES:


Government companies are those that are owned or controlled, explicitly or implicitly, by the Central Government, any State Government or Governments, or both the Central and State Governments.


In the context of a government entity, the Secretary and Auditor-General of India must designate the first auditor within sixty days of the firm's incorporation.


If the Secretary and Auditor-General of India fail to designate any auditor within sixty days, the Board of Directors shall designate the first auditors in the next thirty days.


However, if the Board of Directors fails to select its first auditor within thirty days, then the Company's members must be notified.


As a result, the members must appoint the company's first auditors in an executive general meeting within sixty days. Furthermore, the auditor so selected shall serve until the end of the first AGM.


In respect of a fiscal year, the Secretary and Auditor-General of India shall appoint an auditor within one hundred and eighty days of the fiscal year's beginning. The auditor in question shall serve until the conclusion of the annual general meeting.


In addition, the Secretary and Auditor-General of India must fill any casual vacancy in the office of the Government Corporation's auditor within thirty days. If the Secretary and Auditor-General of India fail to fill the vacancy within thirty days, the Board of Directors must fill it within the next thirty days.



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