Easy way to Appoint of Auditor under companies Act 2013

Section 139 – Auditors Appointment
Applicability
To all types of Companies

Manner and Procedure of selection of auditors Rule 3

auditor
  • Individuals and firm’s qualifications shall be considered by BOD and Audit committee.
  •  When considering the appointment, Board/ Audit Committee shall take importance on these points :
    • Any order of professional misconduct is not passed against proposed auditor
    • Any proceedings of professional misconduct is not pending against the proposed auditor
  • Procedure to be followed for appointment of Auditor :
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Appointment of first Auditor
For Non Government Companies  {139(6)}For Government Companies  {139(5)}
Shall be appointed in 30 days from the date of Incorporation of Companies by BODShall be appointed by Comptroller and auditor General of India
If failure by BOD, then members will appoint in next 60 days at the EGM .In case of failure of Comptroller and auditor General of India, BOD will appoint in next thirst days
In case of failure of BOD, it shall be appointed by members within sixty days at EGM
Before his appointment, a written consent and a certificate of his qualification is obtained from him under section 141
Before his appointment, a written consent and a certificate of his qualification is obtained from him under section 141

Shall hold the office till the conclusion of first  AGMShall hold the office till the conclusion of first  AGM
Notice of such appointment shall be filled to Registrar within 30 days of his appointment in FORM ADT-1Notice of such appointment shall be filled to Registrar within 30 days of his appointment in FORM ADT-1
Subsequent appointment of Auditor
Subsequent appointment under {139(6)}Subsequent appointment under {139(5)}
Appointed by members in AGM by passing ORAppointed by CAG within 180 days from the commencement of financial year
Hold office from the conclusion of 1st AGM  to 6th AGM subject to fulfillment of certain conditionShall hold the office till the conclusion of first  AGM
Casual Vacancy of Auditor
For Non Government CompaniesFor Government Companies
Casual vacancy due to reasons other than resignation , then it is fulfilled by BOD  within 30 daysTo be fulfilled by CAG  within 30 days
If due to resignations  , appointment is required to be approved by the company at the General Meeting convened within 3 months of the recommendations of BoardIf CAG fails , BOD shall fill the vacancy within next 30 days
Rotation of Auditors under section 139(2) to (4)
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1. Listed Company

2. Unlisted public company having paid up share capital of Rs. 10 crore or more

3. All private limited companies having paid up share capital of Rs. 20 crore or more

  4. All companies having paid up share capital of below threshold limit mentioned in (a) and (b) above but having public borrowing from financial institutions, banks or public deposit of Rs. 50 crore or more.

  • Tenure :

No listed company or a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appoint—

(a) an individual as auditor for more than one term of five consecutive years; and

(b) an audit firm as auditor for more than two terms of five consecutive years:

Provided that –

  • an individual auditor who has completed his term under clause (a) shall not be eligible for re-appointment as auditor in the same company for five years from the completion of his term;
  • an audit firm which has completed its term under clause (b), shall not be eligible for re-appointment as auditor in the same company for five years from the completion of such term:

Provided further that as on the date of appointment no audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a company immediately preceding the financial year, shall be appointed as auditor of the same company for a period of five years

Provided also that every company, existing on or before the commencement of this Act which is required to comply with provisions of this sub-section, shall comply with the requirements of this sub-section within three years from the date of commencement of this Act

Provided also that, nothing contained in this sub-section shall prejudice the right of the company to remove an auditor or the right of the auditor to resign from such office of the company.


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  • Cooling off period : 5 years i.e individual/ firm who has served of 5/10 consecutive years are not eligible to be appointed for a period of 5 years in the same company
  • Transitional period :3 years from the commencement of Companies Act 2013
Deemed Re-appointment under section 139(9) and
  • If he is not disqualified
  • He has not given a notice to company for his unwillingness
  • Special resolution has not passed that he shall not be appointed