Introduction
The first auditor of a company, other than a government company, must be appointed by the Board of Directors within 30 days from the date of the company's registration. If the Board fails to make this appointment, the members of the company must be informed and shall appoint the auditor within 90 days at an Extraordinary General Meeting. This auditor will hold office until the conclusion of the first Annual General Meeting (AGM) as per Section 139(6) of the Companies Act.
Mandatory Requirements for the Appointment of the First Auditor
1. Written Consent: Obtain written consent from the auditor before the date of appointment.
2. Auditor's Certificate: Obtain a certificate from the auditor confirming:
Eligibility and non-disqualification under the Companies Act, the Chartered Accountants Act, 1949, and related regulations.
Compliance with the terms provided under the Act.
Adherence to the appointment limits set by the Act.
Disclosure of any pending proceedings related to professional conduct against the auditor or audit firm.
3. Declaration of Compliance: The auditor must declare that they meet the criteria specified in Section 141 of the Companies Act, 2013, as per Rule 4 and 10 of the Companies (Audit and Auditors) Rules, 2014.
4. Qualifications and Experience: The qualifications and experience of the proposed auditor must be considered by the Audit Committee (if applicable) or the Board. This includes any pending proceedings related to professional conduct.
Procedure for Appointment of the First Auditor
Appointment by the Board of Directors in a Board Meeting
1. Convene a Board Meeting:
- Issue at least 7 days' notice (or shorter in urgent cases) to all directors, including the agenda and draft resolution.
- Hold the Board meeting within 30 days of the company's registration to appoint the first auditor and fix their remuneration.
- Prepare and circulate draft minutes within 15 days of the meeting for directors' comments.
2. Filing Notice of Appointment with RoC:
- Inform the appointed auditor and file a notice of appointment with the Registrar in E-Form ADT-1 within 15 days of the Board meeting.
- Attach required documents: certified copy of the resolution, intimation/offer letter to the auditor, consent letter from the auditor, and the auditor's certificate.
Appointment by Members in an Extraordinary General Meeting
If the Board fails to appoint the auditor within 30 days, the members must be informed, and the following procedure applies:
1. Convene a Board Meeting:
- Issue at least 7 days' notice (or shorter in urgent cases) to all directors, including the agenda and draft resolutions.
- Hold the Board meeting to consider the appointment of the first auditor and their remuneration, and to set the date, time, and venue for the General Meeting.
- Prepare and circulate draft minutes within 15 days for directors' comments.
2. Convene a General Meeting:
- Issue a notice of the General Meeting at least 21 days before the meeting, or shorter notice with consent from the majority shareholders.
- Send the notice to all directors, members, auditors, and others entitled to receive it.
- The notice should specify the meeting details and the business to be transacted.
- Hold the General Meeting and pass the Ordinary Resolution for the appointment and remuneration of the first auditor to hold office until the conclusion of the first AGM.