An auditor prepares and examines a company’s financial records and makes sure that they comply with the law. Auditor plays a vital role in the stakeholder of the company. They audit the books of accounts of the company and report to the shareholders regarding the affairs of the Company carried out by the directors of the Company. Only a qualified Chartered Accountant within the Chartered Accountants Act, 1949 can be appointed as an auditor.
As per section 139(6), an auditor has to be appointed
An auditor holds the office after termination of first general meeting till the conclusion of its sixth annual general meeting.
An auditor makes sure to check that the company’s financial records and accounts fully comply with the law. An auditor helps the company from adhering to any fraud by checking its counting methods and procedure to comply that all its finances are legally authentic. An audit by a licensed independent auditor lets a company and its creditors know where it stands concerning following standard accounting principles and guidelines.
Appointment of the 1st auditor of the company is governed through section 139(6) along with non-obstante clause and is appointed within thirty days of the company’s incorporation. ADT-1 to be filed with ROC along with documents like:
In case BOD fails to appoint the auditor within the prescribed time limit, the annual general meeting is called to appoint the auditor within 90 days. Any member of the company can nominate a person for the role of auditor.
In every AGM, a shareholder appoints an auditor who holds the office until the conclusion of the subsequent general meeting. The auditor must be informed about the appointment within seven days of appointing. The auditor has to send in writing his acceptance or refusal to the ROC within 30 days.
If no auditor is appointed by BOD or by a special resolution or the auditor does not give his consent or is declared void then the auditor, then the company needs to apply to the Central Government. Along with the names of the auditors chosen by the company out of which the Central Board appoints one. If the company does not apply in the given time, then it is entitled to pay a fine to the extent of INR 500/-
If no special resolution is passed against the removal of the current auditor, then the auditor even after completing his tenure can be reappointed. At the AGM if the auditor willingly approves of his current position in the company and is not disqualified by any member, then he can be reappointed.
As per section 139(2), companies cannot appoint or re-appoint:-