Appointment of First Auditor under Companies Act, 2013 in Non-Government Companies

Each entity accountable for the business is relied upon to lead an audit on a day by day, week by week, month to month, half-yearly, or yearly basis. The Company should direct an audit to decide its monetary adequacy, just as to check the Annual Accounts, Risk Policy, Compliance, and different guidelines that apply to it. According to section 139 of the Companies Act, 2013 first auditor should be appointed within 30 days of its joining.

 In this article, there will be detailed data for the process of appointment of an auditor, methodology for the appointment of the First Auditor for a Non-Government Company.

Purpose of an Auditor in a Company

An Auditor’s job in a company is to shield the interest of investors in a company. The auditor is legally necessary to dissect the accounts kept by the chiefs and to tell them of the company’s actual monetary status. The auditor will uncover the genuine monetary place of a company, which will help financial backers, investors, and partners of a company, alongside that it will help chiefs in settling on future choices connected with the company.

Different types of Auditor appointed By Company

There are 5 different types of Auditors appointed in a company-

• First Auditor
• Internal Auditor
• Subsequent Appointment of Auditor
• Secretarial Auditor
• Cost Auditor

Appointment of First Auditor by Board of Directors

The first auditor of a non government company should be appointed within 30 days from date of incorporation by the Board of Directors.

Tenure of First Auditor

The first auditor holds office till the conclusion of the first Annual General Meeting of the company.

Process of Appointment of First Auditor by the Board of Directors

Step 1: The Company will acquire certificate recorded as a hard copy from the proposed auditor affirming his/its: 

• Eligibility and; 
• Consent to go about as auditor of the company.

Step 2: Issue notice to all directors according to Section 173 of the Companies Act, 2013 calling Board Conference for appointment of First Auditor of the Company. 

Step 3: Convene a Board meeting within 30 days of Incorporation of the company and pass a resolution for: 

• Appointing the first auditor and; 
• Fixing his compensation. 

Step 4: Inform the first auditor appointed with a certified true duplicate of the resolution and appointment letter. 

Step 5: Company should file notice of such appointment in Form ADT-1 to the Registrar within 15 days of such Board Meeting.

Process of Appointment of First Auditor by Members, when Board fails to Appoint

If the Board fails to appoint First Auditor within 30 days from the date of Incorporation of the company, it will inform the members regarding the company and the members will make the appointment of the first auditor within 90 days of data at an Extra-Ordinary General Meeting.

Tenure of First Auditor

The first auditor shall hold office till the conclusion of the First Annual General Meeting of the company

Procedure for Appointment of First Auditor by Members

Step 1:Issue notice to all directors according to Section 173 of the Companies Act, 2013 calling Board Meeting for appointment of First Auditor of the Company. 

Step 2:Convene a Board meeting: 

• To examine the matter with respect to the appointment of First Auditor of the Company; 
• To conclude the day, date, overall place of Extra-Ordinary General Meeting which will not be past 90 days of Board’s information or inability to appoint the first auditor and
•  To approve the notification of the Extra-Ordinary General Meeting. 

Step 3:Issue the notice of Extra-Ordinary General Meeting to the members from the company. 

Step 4:Hold Extra-Ordinary General Meeting and pass Ordinary Resolution for appointing the first auditor. 

Step 5: Inform the first auditor so appointed with an certified true copy of the resolution and appointment letter. 

Step 6: Company should record a notice of such appointment in Form ADT-1 to the Registrar within 15 days of such Extra-Ordinary General Meeting.

Documents Required with Form ADT-1

Following documents shall be attached with form ADT-1:

• Certified True Copy of Ordinary Resolution; 
• Intimation Letter given by the company to the Auditor; 
• Consent Letter and Eligibility Certificate given by the Auditor to the Company; 
• Appointment Letter.

Final Words

The Auditor is appointed in the company under section 139 of the Companies Act, 2013. The provisions overseeing the appointment of an auditor for a public company are more severe than those administering the appointment of an auditor for a private company. A listed business, for instance, can’t choose a person as an auditor for over five years straight. Also, an audit firm can’t fill in as the auditor of an openly listed company for multiple terms that are five consecutive years.