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    Appointment of Auditor

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    Appointment of Auditor

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    Appointment of Auditor

    INTRODUCTION

    Appointment of Auditor is considered necessary as they are the ones who will be inspecting the company’s financial statement. To improve and maintain the true and fair picture of the company’s accounts, auditors play an important role in the running of the company.

    An Auditor appointed protects the interest of the existing shareholders of the company and that is the prime reason why after incorporating the company, an Auditor is appointed by the Board within 30 days from the date of incorporation of the company.

    Who can be appointed as an auditor?

    1. Primarily, a person who is a Chartered Accountant in practice shall be eligible to be appointed as an auditor of the company.
    2. Secondly, a firm can also be appointed as an auditor of the company, however only the partners recognized as Chartered Accountants in practice shall be allowed to act and sign on behalf of the firm.

    Who all are not eligible to be appointed as an auditor?

    A person cannot be appointed as an auditor who falls under the below-mentioned list.

    • a body corporate
    • an officer or employee of the company
    • a person who is a partner, or who is in the employment of the company
    • a person who is a relative or a partner
    • a person or a firm who has a business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary
    • a person whose relative is in the employment of the company as a director or key managerial personnel
    • a person who is in full-time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding appointment as auditor of more than 20 companies other than OPC, Dormant Co., Small Co as well as private companies having paid-up share capital less than one hundred crore rupees.
    • a person who has been convicted by a court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction.
    • a person who, directly or indirectly, renders any service to the company or its holding company or its subsidiary companies

    Where a person appointed as an auditor of a company incurs any of the disqualifications mentioned in the above clause, he shall vacate the office and the vacancy shall be deemed to be a casual vacancy in the office of the auditor.

    An auditor is a person designated and appointed to perform the function of reviewing and verifying financial records. Also, an auditor has to make sure that his responsibility is also to ensure that all the tax and other norms are also being satisfied and no fraudulent accounts are maintained by the company.

    An auditor is an independent person separate from its members and directors who is not involved in the company’s matter.

    An auditor is identified as a person who has expertise in reviewing and verifying financial records and accounts of the company and has also been recognized as a Chartered Accountant under the Chartered Accountant Act, 1949.

    FIRST AUDITOR

    The first auditor of the company is appointed by the BOD (Board of Directors) within 30 days from the date of registration or incorporation of the company. [Section 139(6) of the Companies Act]

    *Note:- The above clause doesn’t apply to Government Companies.

    In case of failure of the Board to appoint the auditor, it is the responsibility of the Board to inform the members of the company. Members of the company shall appoint the auditor within 90 days at an EGM (Extra-Ordinary General Meeting). The tenure of the first auditor shall be till the conclusion of the first annual general meeting.

    In case of a following company’s, the auditor shall be appointed by the CA&G (Comptroller and Auditor-General of India). The time frame within which the CA&G shall appoint the auditor is within 60 days from the date of registration of the company. [Section 139(7) of the Companies Act, 2013]

    1. Government company
    2. Any other company, owned and controlled, directly or indirectly, by the Central Government or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments,

    Company may file ADT 1 for an appointment for auditor:

    Documents required:

    1. Appointment of auditor by passing Board Resolution
    2. Intimation to Auditor proposed for auditing the financials.
    3. Confirmation from the Auditor

    All these documents are prepared by a professional. To get quick processing of all these crucial documentation, contact EAdvisors.

    CASUAL VACANCY

    Casual Vacancy can happen in the office anytime any day which is required to be filled at the earliest to be in proper compliance with the rules & regulations set by the act.

    Section 139 (8) of the Companies Act 2013 mentions the clause of casual vacancy.

    It states for a company other than a company that requires an audit by CAG, the casual vacancy shall be filled by the Board of Directors within 30 days.

    And in case if vacancy happens due to the resignation of an auditor, such an appointment shall be approved by the company at the general meeting convened within three months of the recommendation by the Board and he shall hold the office till the conclusion of the next annual general meeting.

    But if it is a company whose accounts are subject to audit by an auditor appointed by CAG (Comptroller and Auditor General of India), the vacancy then shall be filled by the Comptroller and Auditor-General of India within 30days.

    Where Comptroller and Auditor General of India fails to fill the vacancy within the prescribed time, then the Board of Directors shall fill the vacancy within the next 30 days.

    Form Filed:

    • Form ADT 3 shall be filed by the auditor within 30 days from the date of resignation and a resignation letter stating the reason.

    Documents required:

    1. Resignation letter that is prepared by your Chartered Accountant or Company Secretary.

    If you do not have any of the above professionals then don’t worry EAdvisors are there at your service.

    RE APPOINTMENT

    Under Section 139(9) of the Companies Act, a retiring auditor may be re-appointed at an annual general meeting, if:-

    • the person is not disqualified for re-appointment;
    • the person has not submitted to the company any notice of his unwillingness to be re-appointed; and
    • a special resolution has not been passed for appointing other auditor in that specific meeting or expressly mentioning in the meeting that he shall not be re-appointed.

    Where there happens no appointment or reappointment of an auditor, in that circumstance, the existing auditor shall continue to be the auditor of the company.

    And where a company is required to constitute an Audit Committee under Section 177, the appointment including the filing of a casual vacancy of an auditor under this section shall be made after taking into account the recommendation of such committee.

    Form Filed:

    The Company shall be required to file ADT-1 for informing the Registrar about the appointment of the Auditor within the time frame of 15 days from the date of appointment.

    Documents required:

    1. Written consent from the proposed auditor
    2. Certificate of Appointment by the Auditor
    3. Filing Notice of Appointment with ROC

    There are some provisions mentioned under section 139(9) which states some conditions to be complied with to be reappointed as an auditor. Reappointment can be done of retiring auditor only if:-

    • he is not disqualified for re-appointment;
    • he has not given notice of his unwillingness to be re-appointed as an auditor;
    • a special resolution has not been passed appointing some other auditor.

    Provisions of reappointing of an auditor is almost identical to the provisions of appointing the first Auditor.

    REMOVAL OF AUDITOR

    Under Section 140(1) of the Companies Act, 2013, the auditor can be removed even before the term ends by simply preparing a special resolution.

    Form ADT-2 shall be filed to submit the application to the Central Government for removal of an auditor with the applicable fees. As per Rule 7(2), the application shall be made to the Central Government (powers delegated to Regional Director) within 30 days of the resolution passed by the board.

    Forms filed:

    • ADT-2
    • MGT-14
    • RD-1

    Document required:

    • Board Resolution
    • Application seeking approval from Regional Director

    RESIGNATION OF AUDITOR

    As per the legal requirement mentioned in the act, a statement is required to be filed for resignation purposes. The statement shall be filed within 30 days from the date of resignation with the Registrar. Whereas in the case of a Government Company or Government Owned Company, the auditor has to file a statement with the CAG (Comptroller and Auditor-General of India).

    While filing the application with the prescribed authorities, the auditor is required to indicate the reason and other important facts for taking resignation to avoid penalty or charges.

    The penalty attracted in case of non-compliance of filing a statement of resignation is Rs. 50,000 or an amount equal to the remuneration, whichever is less. And where there occurs further delay, then the auditor shall be liable to pay a penalty of Rs. 500 for each day of such continuing failure.

    Form filed:

    • Form ADT-3 shall be filed by the auditor.

    Documents required:

    • Resignation letter
    • Consent letter from new auditor

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    Intelligent Working method

    As the world is also getting advance within time, we have also established online way of accepting documents and creating your company.

    How we work

    Day 1

    The first day is when a client sends documents. The day, when we receive the client’s documents that are required for the appointment of an auditor.

    Day 2

    Generally, on the second day we begin with drafting of the documents and further send it to the client for signing purpose.

    Day 3

    Day 3 is when we receive the signed documents from the client. After documents are received, a quick check is done to make sure everything is in proper manner. After it’s checked, filing of form with ROC is done.

    Frequent Asked Questions

    Appointment of Auditor

    An auditor of a company other than the Government company shall be appointed by the Board of Directors. The BOD (Board of Directors)have the responsibility to appoint the first auditor within 30 days from the date of registration of the company.

    An auditor can be appointed by any of the following persons mentioned below:

    1.Board of Directors of the Company

    2.Members of the Company

    3.Central Government

    These are the three modes responsibile for appointment of an auditor

    A Body corporate cannot become an auditor of the company. Only an independent person recognized by the act (Chartered Accountant) can become an auditor of the company, having no personal involvement in the company.

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