What is the role of an auditor?

All government and non-government organisations are required to keep track of their accounts and audit reports as the financial year approaches. The financial statements need to be meticulously assessed before submitting to the authorised departments. An auditor does this thorough assessment of financial documents. In case of any inconsistency in the reports, the auditor is held responsible. Thus, the auditor plays a vital role in any organisation. 

Pursuant to section 139(6) of Companies Act 2013, a Private Limited company which is newly incorporated has to appoint its first auditor within 30 days from the date of incorporation in the first board meeting. If the board of directors are not able / failed to appoint, then auditor has to be appointed within 90 days in a General Meeting.

First auditor as appointed above will hold office from date of appointment in the first board meeting to till the conclusion of the first annual general meeting (AGM).

There is no clarity whether first auditor appointment is to be informed to Registrar of Companies (ROC) by filing ADT-1 or not. But the Form ADT-1 has the option to file 1st Auditor appointment within 15 days of appointment. Therefore, it is better to file ADT-1 within time.

Procedure to appoint first auditor

1. Intimate the proposed auditor(s) regarding the intention of appointing him as 1st auditor and enquire whether he is eligible and not disqualified to be appointed as auditor of the company and if appointed number of companies will be within the specified limits.

2. Obtain his/her consent letter

3. Conduct first board meeting within 30 days of Incorporation

4. Along with other items, appoint first auditor and decide his/her remuneration

5. File for ADT-1 within 15 days from the appointment

6. Intimate the Auditor appointed, along with extract of the board meeting resolution of his/her appointment.

Appointment auditor in a Private Limited Company

As per section 139(1) every company shall appoint at its first annual general meeting an individual or a firm as an auditor of the company who shall hold office who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting.

Tenure: 5 consecutive years.

Remuneration: As per section 142(1) remuneration of the auditor of a company shall be fixed in its general meeting or in such manner as may be determined therein.

Written consent and certificate from the auditor: As per second proviso to section 139(1) auditor has to give a written consent to become the auditor of the company & a certificate stating that appointment is in accordance with conditions prescribed.

Intimation to Auditor and ROC: The company shall inform the auditor regarding appointment and also file a form ADT-1 to ROC within 15 days of the meeting in which the auditor is appointed.

Procedure to appoint Statutory Auditor

1. Intimate the proposed auditor(s) regarding the intention of appointing him Statutory Auditor and enquire whether he is eligible and not disqualified to be appointed as auditor of the company and if appointed number of companies will be within the specified limits.

2. Obtain his/ her consent letter and certificate stating their eligibility

3. Appoint him/her in the pre-AGM Board Meeting subject to Members approval in the ensuing AGM

4. Along with other items, appoint auditor and decide his/her remuneration

5. File for ADT-1 within 15 days from the appointment

6. Intimate the Auditor appointed, along with extract of the AGM resolution of his/her appointment.

Also read: Understanding auditor resignation as per Companies Act 2013

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