First Auditor: Process to Appoint the Auditor

[Ishita Ramani]

Introduction

Every entity in charge of the business is required to perform an audit everyday, every week, every month, every six months, and every year. The Company must carry out an audit to evaluate its financial stability and to confirm that it is in compliance with all applicable laws, including those related to its annual accounts, risk policy, compliance, and other areas. A company’s first auditor must be chosen within 30 days of incorporation in compliance with section 139 of the Companies Act, 2013. Detailed information regarding the process for appointing an auditor and the first auditor for a company will be provided in this article.

Objective of an Auditor of the Company

The responsibility of an auditor in a company is to protect the interests of its shareholders. According to the law, the auditor is obligated to review the directors’ accounting records and inform them of the company’s actual financial situation. The auditor will show the company’s real financial status, which will benefit investors, shareholders, and stakeholders, as well as directors in making future decisions about the company.

Appointment of an Auditor under Companies Act, 2013

According to section 139 of the Companies Act of 2013, the First Auditor of a business other than an agency of the government must be chosen by the Board within 30 days after incorporation. An EGM (Extraordinary General Meeting) must be summoned within 90 days to elect the First Auditor in the case that the Board is ineffective. The 90-day period begins on the day of incorporation rather than when the 30-day period expires.

When a company appoints its first auditor, Form ADT must be submitted. The Board of Directors of the Company can pass a resolution to appoint the Auditor after obtaining the consent of an Auditor. The appointment of the auditor must be submitted to the Registrar of Companies within 15 days of her or his employment. The first auditor shall hold office from the end of such a meeting until the close of the sixth Annual General Meeting of the Company. However, the company must request that members approve the appointment of an auditor at each Annual General Meeting (AGM).

Process for appointment of First Auditor

• The auditor will hold office in this capacity until the end of the first annual general meeting.
• Form ADT-1 and the funds that are required must be filed by the company to the Registrar of Companies.
• If the company is publicly traded, the auditor general of India and comptroller will select the first auditor within 60 days of the company’s incorporation date.
• If the Comptroller General of India does not do so within the allotted time, the company’s board of directors will do so within the following 30 days. If the board does not do so within the following 30 days, the company shall appoint the auditor by itself.

Process for appointment of an Auditor other than First Auditor

A general meeting of the company’s members is required to elect auditors (other than the first auditors). As soon as the meeting is over, the auditor elected at the general assembly assumes his or her duties, and the current meeting is regarded as the auditor’s first meeting after being appointed.

However, within three months of the Board’s decision date, the permission of members must be obtained if a temporary vacancy in the office of an auditor arises from registration. The auditor chosen at the meeting will keep working until the following annual general meeting. The Company shall file ADT-1 within 15 days after the appointment of the new auditor.

Documents Needed for Appointing a New Auditor for a Company

The following forms must be submitted by the company when appointing an auditor for a company.

• Submit Form MGT-14 together with documentation of the resolution at the time of the First Auditor Appointment.
• Form ADT-1 must be submitted to the ROC.

The ROC also needs the following data in addition to the forms mentioned above.

• Name of the new auditing firm.
• The address of the new auditing firm.
• PAN Email and phone number
• The duration of the contract that the company has with the client
• Details about the auditing firm that left.
• The date of appointment of the new auditor firm.
• ADT-1 form, including bearing the director of the company’s signature and a digital signature.

The company annual compliance service cost refers to the expenses associated with ensuring a business’s adherence to the necessary legal, regulatory, and financial obligations on an annual basis. This service encompasses a range of tasks, including but not limited to, filing annual reports, maintaining proper corporate records, conducting audits, complying with tax requirements, and meeting industry-specific regulations. The cost of this service can vary widely based on factors such as the size of the company, its industry, jurisdiction, and the complexity of its operations. By investing in annual compliance services, businesses can mitigate risks, maintain their legal standing, and foster transparency in their operations, contributing to their long-term sustainability and growth.

Summary

In accordance with Section 139 of the Companies Act, 2013 the Auditor is chosen for each company. The laws regulating the appointment of an auditor for a Public Company are stricter than those for a Private Company. For instance, a listed company isn’t allowed to choose the same auditor for more than five years in a row. A publicly traded company’s auditor cannot be a firm of auditors for more than two terms, or five consecutive years