{"id":445,"date":"2019-09-10T12:54:06","date_gmt":"2019-09-10T12:54:06","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=445"},"modified":"2021-03-10T12:44:42","modified_gmt":"2021-03-10T07:14:42","slug":"appointment-of-auditor-companies-act-2013","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/","title":{"rendered":"Appointment of Auditor \u2013 Companies Act, 2013"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Every\nentity running the business is required to do the audit on a day to day basis\nor a quarterly basis or a monthly basis or a half year or yearly basis. Audit\nis required to be carried out in the Company to know the financial stability,\nfor verifying the Annual Accounts, Compliance, risk policy, and other laws\napplicable to the Company.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#Types_of_Auditor_required_to_be_appointed_in_the_Company\" >Types of Auditor required to be appointed in the Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#Procedure_of_Appointment_of_Auditor_as_per_Companies_Act_2013\" >Procedure of Appointment of Auditor as per Companies Act,\n2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#Subsequent_Appointment_of_Auditor\" >Subsequent Appointment of Auditor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#The_Process_to_be_followed_for_the_appointment_of_the_Internal_Auditor\" >The Process to be followed for the appointment of the\nInternal Auditor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#Secretarial_Auditor\" >Secretarial Auditor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#The_Process_to_be_followed_for_the_appointment_of_the_Internal_Auditor-2\" >The Process to\nbe followed for the appointment of the Internal Auditor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#Cost_Auditor\" >Cost Auditor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#Documents_required_in_appointing_auditor\" >Documents required in appointing auditor?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/corpbiz.io\/learning\/appointment-of-auditor-companies-act-2013\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Auditor_required_to_be_appointed_in_the_Company\"><\/span>Types of Auditor required to be appointed in the Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li>First Auditor Appointment<\/li><li>Subsequent Appointment of Auditor<\/li><li>Casual Vacancy<\/li><li>Internal Auditor<\/li><li>Secretarial Auditor<\/li><li>Cost Auditor<\/li><\/ol>\n\n\n\n<p>According to<strong> Companies Act, 2013<\/strong><sup><a href=\"http:\/\/www.mca.gov.in\/MinistryV2\/companiesact2013.html\"><strong>[1]<\/strong><\/a><\/sup> section 139(6) the first auditor of the company other than a government company shall be appointed within 30 days of the incorporation by the Board. In case of the Board\u2019s failure, within 90 days an EGM shall be held for appointing the first auditor. The law does not provide the time concerning from when the time limit of 90 days be calculated. Thus, the benefit is in taking a stricter view and construe that the limit of 90 days starts from Incorporation date rather than the expiry of 30 days.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_of_Appointment_of_Auditor_as_per_Companies_Act_2013\"><\/span>Procedure of Appointment of Auditor as per Companies Act,\n2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>First Auditor Appointment<\/strong><\/p>\n\n\n\n<p>An auditor so appointed will hold the office until the conclusion of the first&nbsp;<a href=\"https:\/\/corpbiz.io\/learning\/annual-general-meeting\/\"><strong>Annual General Meeting<\/strong><\/a>. The Company is required to file the form ADT-1 with the&nbsp;Registrar of Companies&nbsp;along with the prescribed fees.<\/p>\n\n\n\n<p>In case of Government Companies the first auditor shall be appointed by the Comptroller and Auditor General of India within sixty days from the date of incorporation of the Company and in case the Comptroller General of India does not appoint such auditor within the said period of time, then the Board of Director of the Company shall appoint such auditor within the next thirty days and in the case of failure of the Board to appoint such auditor within the next thirty days then the member approval is required to be taken within sixty days in the Extra Ordinary General Meeting. The First Auditor shall hold the office until the conclusion of the First Annual General Meeting.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Subsequent_Appointment_of_Auditor\"><\/span>Subsequent Appointment of Auditor<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nappointment is done by the Members and he will hold the office till the\nconclusion of the sixth Annual General Meeting.<\/p>\n\n\n\n<p><strong><em>The retiring auditor may be re-appointed at the Annual General Meeting\nif:<\/em><\/strong><\/p>\n\n\n\n<ul><li>he is not disqualified for re-appointment;<\/li><li>he has not shown the unwillingness to the Company for re-appointment; and<\/li><li>A Special Resolution has not been passed for appointing some other auditor in the meeting or providing expressly that he shall not be re-appointed.<\/li><\/ul>\n\n\n\n<p><strong><em>The following class of Companies shall appoint or reappoint:<\/em><\/strong><\/p>\n\n\n\n<ul><li>An Individual as Auditor for more than one term of five consecutive years and<\/li><li>An audit firm as auditor for more than two terms of five consecutive year<\/li><\/ul>\n\n\n\n<p>If the individual auditor or audit firm which has completed his term as mentioned above shall not be eligible for re-appointment in the same Company for five years from the completion of such term.<\/p>\n\n\n\n<p><strong>Casual Vacancy<\/strong><\/p>\n\n\n\n<p>If the\nCompany has appointed the auditor and if it results due to the Resignation of\nthe Auditor then it will be treated as the casual vacancy of the Auditor, then\nsuch appointment shall be filled by the Board of Director within thirty days\nand such appointment shall be approved by the Company at the general meeting to\nbe convened within three months of the recommendation of the Board and shall\nhold office till the conclusion of General Meeting.<\/p>\n\n\n\n<p>In case of\nGovernment Companies, the casual vacancy shall be filled by the Comptroller\nAuditor General of India within thirty days, if the Comptroller Auditor General\nof India fails to appoint within the said period the Board of Directors shall\nfill the vacancy within next thirty days.<\/p>\n\n\n\n<p><strong>Internal Auditor<\/strong><\/p>\n\n\n\n<p>Internal\nAudit is carried out by the professionals which involve risk management,\ncontinuous monitoring, accounting, and corporate governance depending upon the\nfunctionality of the business.<\/p>\n\n\n\n<p><strong><em>The following class of the Company is required to appoint an Internal\nAuditor:<\/em><\/strong><\/p>\n\n\n\n<ul><li>every Listed Company;<\/li><li>every unlisted Company having:<\/li><li>Paid-up  share capital of Rs. 50 crore or more during the preceding financial year or;<\/li><li>Turnover of Rs. 200 crore or more during the preceding financial year.<\/li><li>Outstanding loans or borrowings from banks or financial institutions exceeding Rs. 100 crore rupees or more at any point in time during the preceding financial year.<\/li><li>Every private Company having:<\/li><li>Turnover of Rs. 200 crore or more during the preceding financial year; or<\/li><li>Outstanding loans or borrowings from banks or financial institutions exceeding Rs. 100 crore rupees or more at any point in time during the preceding financial year. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Process_to_be_followed_for_the_appointment_of_the_Internal_Auditor\"><\/span>The Process to be followed for the appointment of the\nInternal Auditor<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li>Hold the&nbsp;<a href=\"https:\/\/corpbiz.io\/learning\/quorum-for-board-meeting-in-regards-to-companies-act-2013\/\"><strong>Board Meeting<\/strong><\/a>&nbsp;and send at least 7 days prior notice before the date of the Board\nMeeting.<\/li><li>Convene the Board Meeting and pass\nthe resolution for the same.<\/li><li>After passing the resolution Form\nMGT-14 is required to be filed with the Registrar of Companies within 30 days\nfrom the day of the passing of the resolution.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Secretarial_Auditor\"><\/span>Secretarial Auditor<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is\nAudit which gives guidance and overview of the Compliance by the Company of the\napplicable laws and regulations.<\/p>\n\n\n\n<p><strong><em>As per the Companies Act, 2013, the following classes of the Companies\nare required to appoint the Secretarial Auditor of the Company:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Every Listed Company; or<\/li><li>Every Public Company having a paid-up share capital of Rs. 50 crore or more; or<\/li><li> Every Public Company having turnover Rs. 250 crore or more. <\/li><\/ul>\n\n\n\n<div class=\"shadow1\"><strong>Note:<\/strong> The Secretarial Auditor has to submit the Secretarial Audit Report given by the Company Secretary in practice in prescribed Form No. MR-3 and it shall be annexed in the Board\u2019s Report of the Company.<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Process_to_be_followed_for_the_appointment_of_the_Internal_Auditor-2\"><\/span>The Process to\nbe followed for the appointment of the Internal Auditor<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li>Hold the Board Meeting and send at\nleast 7 days prior notice before the date of the Board Meeting.<\/li><li>Convene the Board Meeting and pass\nthe resolution for the same.<\/li><li>After passing the resolution Form\nMGT-14 is required to be filed with the Registrar of Companies within 30 days\nfrom the day of the passing of the resolution.<\/li><\/ol>\n\n\n\n<p><strong>Non\nCompliance:<\/strong><\/p>\n\n\n\n<p>If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cost_Auditor\"><\/span>Cost Auditor<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Cost\nAudit is the audit process for verifying the cost allocation of each product or\nServices comprising of labor cost, manufacturing cost or any other item of cost\nas applicable.<\/p>\n\n\n\n<p><strong><em>The following is the process for the appointment of cost auditor:<\/em><\/strong><\/p>\n\n\n\n<ol><li>Hold the Board Meeting and send at\nleast 7 days prior notice before the date of the Board Meeting.<\/li><li>Convene the Board Meeting and pass\nthe resolution for the same.<\/li><li>After passing the resolution file the\nprescribed form with ROC within 30 days of the passing of Resolution or within\n180 days of the commencement of financial year whichever is earlier.<\/li><\/ol>\n\n\n\n<p><strong>Penalty\nfor Non-Compliance:<\/strong><\/p>\n\n\n\n<p>Any non-\ncompliance made under this Cost Audit, the Company and every officer of the\nCompany who is in default shall be punishable as mentioned under:<\/p>\n\n\n\n<ol><li>Company shall be punishable with fine\nwhich shall not be less than Rs. 25,000 but it may extend to Rs. 5 Lakh and<\/li><li>Every officer of the Company who is\nin default shall be punishable with imprisonment for a term which may extend to\none year or with fine which shall not be less than Rs. 10,000 but it may extend\nto Rs. 1Lakh or both<\/li><li>If the Cost Auditor has contravened\nthe provisions, he shall be punishable with imprisonment for a term which may\nextend to one year and with fine which shall not be less than Rs. 50,000 but it\nmay extend to Rs. 25 Lakh or eight times the remuneration of the Cost Auditor,\nwhichever is less.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Documents_required_in_appointing_auditor\"><\/span><strong>Documents<\/strong><strong> <\/strong><strong>required<\/strong><strong> <\/strong><strong>in appointing<\/strong><strong> auditor?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>The various documents required for appointing an auditor is given below:-<\/strong><\/p>\n\n\n\n<ol><li>Proposed Auditor\u2019s Consent <\/li><li>Qualified Certificate to be appointed as auditor<\/li><li>Resolution of Board<\/li><li>Resolution of Annual General Meeting and notice of Annual General Meeting<\/li><li>Non objection certificate from older audit<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Appointment of Auditor is mandatory if the Company falls under the prescribed class of companies mentioned in the Companies Act, 2013 and needs to appoint the auditor accordingly. The Audit is essential in the Company to track Compliance, Taxation, and Financial Stability. To obtain more information get in touch with us.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/new-company-under-companies-act-2013-via-spice\/\">\nHow to Establish a New Company under Companies Act 2013 via SPICE+?\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Every entity running the business is required to do the audit on a day to day basis or a quarterly basis or a monthly basis or a half year or yearly basis. Audit is required to be carried out in the Company to know the financial stability, for verifying the Annual Accounts, Compliance, risk policy, [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":454,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[102],"acf":{"service_id":"1"},"authorName":"Shalini Singh","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2019\/09\/MEE.jpeg","authorDescription":"Shalini is a B.tech graduate but her keen interest in writing impelled her to continue as a content writer. Further, She has a rich experience in Companies Act and Ammendment related topics.","postViews":43756,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/445"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=445"}],"version-history":[{"count":19,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/445\/revisions"}],"predecessor-version":[{"id":27208,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/445\/revisions\/27208"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/454"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}