Aakanksha Singhal
Aakanksha Singhal
Published on: Oct 6, 2022
Khushboo Sharma
Updated on: Jun 14, 2023
Introduction:
Every Company incorporated in terms of the provisions of Companies Act, 2013 requires to get their financial records reviewed and verified by qualified professionals. Thus, after incorporation companies shall ensure appointment of a qualified auditor in terms of the provisions of Companies Act, 2013.
In case of Government Companies or any other company* owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments, the First Auditor shall be appointed by the Comptroller and Auditor General (C&AG) of India within 60 days from the Registration date of such company.
And, in case the Comptroller and Auditor General (C&AG) does not appoint such auditor within the said timeframe, then the company’s board shall appoint such auditor within the next 30 days. Further in case the board also fails to appoint such auditor within the stipulated timeframe, the members of the company shall endeavour to appoint such auditor within the next 60 days at a duly convened Extraordinary General Meeting.
Note: The Ministry of Corporate Affairs vide its Circular dated July 31, 2014 has clarified that the documents like Articles of Association and shareholders agreements etc. envisaging control in terms of the provisions of the Companies Act, 2013 are to be taken into account while deciding whether an individual company is covered under the provisions of Section 139(5) & 139(7) (on Appointment of Auditor by the Comptroller and Auditor General (C&AG) in case of Government Company) of the Act.
“Applicable Provisions:
- Section 139 & 141 of Companies Act, 2013
- Rule 4 of the Companies (Audit and Auditors) Rules, 2014
Mandatory Requirements:
- Obtain recommendations from the Audit Committee, if any with respect to all the appointments, including the filling of a casual vacancy of an auditor
- Obtain Written consent from the Auditor on or before the date of his appointment and a certificate indicating the adherence to the criteria provided in section 141 (on Eligibility, Qualifications and Disqualifications of Auditors) of the Act
- Auditor’s appointment shall be in accordance with the following conditions:
- individual or firm, as the case may be, is eligible for appointment and not disqualified under Chartered Accountants Act, 1949 and rules or regulations made thereunder
- proposed appointment is in line with the term provided under the Act
- proposed appointment is within the limits laid down by or under the authority
- list of proceedings against the auditor or audit firm or any partner of the audit firm pending w.r.t professional matters of conduct, as disclosed in the certificate, is true and correct
- conforms to the provisions of section 141 of Companies Act, 2013
- Intimate the Registrar about appointment of auditor made by the Comptroller and Auditor General (C&AG)
- The First Auditor so appointed by the Comptroller and Auditor General (C&AG) or the Board/ Members of the company shall hold the office until the conclusion of the first Annual General Meeting.
Procedure to be Followed:
- Appointment of First Auditor:
The First Auditor in case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments shall be appointed through any of the following ways:
- Appointment of First Auditor by the Comptroller and Auditor General (C&AG) of India
The first auditor of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments shall be appointed by the Comptroller and Auditor General (C&AG) within 60 days from the date of registration of such company.
- Appointment of First Auditor by Board of Directors in Board Meeting
In case the Comptroller and Auditor General (C&AG) does not appoint the first auditor in the Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments within the stipulated timeframe of 60 days as stated above, then the Board of the company shall appoint such first Auditor within the next 30 days in a duly convened Board Meeting.
Please refer to the Procedure for Conducting Board Meeting for the detailed procedure.
- Appointment of First Auditor by members in Extraordinary General Meeting
In case the Board of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments fails to appoint such first Auditor within the stipulated timeframe of 30 days, then such fact shall be intimated to the members of the Company, who shall appoint the first Auditor within the next 60 days in a duly convened Extraordinary General Meeting.
Please refer to the Procedure for Conducting Extraordinary General Meeting (EGM) for the detailed procedure.
- File Form MGT-14 with ROC:
The company shall file Form MGT-14 with the Registrar of Companies (ROC) within 30 days of the Meeting in which such Auditor is appointed along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and the requisite documents.
- Filing Notice of Appointment with ROC [Section 139(1) and Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014]:
The Company shall inform the First Auditor so appointed about the appointment and subsequently file a notice of such appointment with the Registrar in Form No. ADT-1 within 15 days of the meeting in which such Auditor is appointed along with the following attachments:
- Mandatory:
- Copy of written consent given by auditor
- Copy of resolution passed by the board/company in case Nature of appointment is other than Auditor appointed by the Tribunal or Others
- Copy of the order of the Tribunal in case Nature of appointment is Auditor appointed by the Tribunal
- Optional:
- Copy of the intimation sent by company
- Copy of the letter of appointment from C&AG
- Optional attachments, if any.
