Appointment of Auditor, Casual Vacancy, ROC Filing, First Auditor Appointment

Any person who is a chartered accountant can be appointed as an auditor of the company. In the case of a firm where most of the partners are Chartered Accountants practicing in India, they may be appointed as auditors of the company, here the firm also includes LLP. This article will discuss all the appointment of auditors.

Appointment of auditor under the Companies Act, 2013

The first auditor of a non-state enterprise must be appointed by the board of directors within 30 days of its incorporation under Section 139 of the Companies Act 2013. If the board of directors fails, an extraordinary general meeting must be held within 90 days to appoint the first auditor. The 90-day limit begins on the date of incorporation, not the expiration of the 30-days.
The ADT form must be submitted at the time of the first appointment of the auditor in the company. After obtaining the auditor’s credentials, the company’s board of directors can make a resolution on the appointment of the auditor. The appointment of an auditor must be notified to the commercial register within 15 days of his appointment. The first auditor may serve from the end of this meeting until the end of the sixth general meeting of the company (annual general meeting). However, the company should submit the issue of the appointment of an auditor for ratification by the members at each Annual General Meeting (AGM).

Appointment of the first Auditor in the Company 

According to Section 139(6) of the Companies Act, the first auditor of a company that is non-governmental should be appointed by the board of directors within 30 days from the date of incorporation or registration of the company.
And if the board of directors does not appoint an auditor, it informs the members of the company, who then appoint the auditor at an extraordinary general meeting within 90 days of this notification. Such an auditor, who has been appointed, holds the position of auditor until the end of the first general meeting.

Procedure for appointment of Auditors

First Auditor: The auditor so appointed will hold office until the end of the first annual general meeting. The company is required to file the ADT-1 form with the Commercial Register along with the prescribed fees.
In the 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 registration of the company and in case the Comptroller General of India does not appoint a such an auditor within the said period, then the board of directors of the company shall appoint such auditor within thirty days and in case, that the board of directors does not appoint a such an auditor within thirty days, a member’s approval is required within sixty days in an extraordinary Ordinary General Meeting. The first auditor serves until the end of the first annual general meeting.

Subsequent appointment of auditor: The appointment is made by the members and he will hold office until the conclusion of the sixth annual general meeting.

A resigning auditor may be reappointed at the annual general meeting if:

• Is not disqualified for reappointment;
• Did not show reluctance to the company for re-appointment; and
• No special resolution has been passed to appoint another auditor at the meeting or expressly provides that he will not be re-appointed.

The following class of companies appoints or re-appoints:

• A natural person as an auditor for more than one five consecutive years 
• Audit firm as auditor for more than two terms of office of five consecutive years

Where an individual auditor or an audit firm who has completed his term of office as aforesaid shall not be eligible for re-appointment in the same firm for five years from the end of such term.

What are ROC and ROC Filing?

The Registrar of Companies (ROC) is an office under the Ministry of Corporate Affairs (MCA) that oversees the administration of all companies and limited liability companies (LLPs) in India. The MCA controls and regulates all entities and LLPs under the Companies Act, 1956 and the Companies Act, 2013. 

• ROC is the authority that looks after the registration or incorporation of a company in India.
• Filing ROC means filing audited financial statements and annual statements of ROC companies.
• According to Sections 129 and 137 of the Companies Act 2013, every company should submit audited financial statements to the ROC.
• Similarly, under Section 92 of the Companies Act, 2013, annual returns must be submitted to the ROC.

Procedure of ROC filing

The ROC procedure of the filing annual returns and audited financial statements can be easily understood through the following process:

• Hold a board meeting: To entrust the auditor with the preparation of financial statements following Annex III of the Companies Act of 2013. To authorize a director or company secretary to prepare a board report and an annual report under the Companies Act 2013.
• To organize another meeting of the board of directors to approve the draft financial statements, the report of the board of directors, and the annual report to the director of the company.
• Manage the company’s annual general meeting and adopt the necessary resolutions. Please note that the financial statements are considered final only when approved by the shareholders at the general meeting.

Casual vacancy of Auditor

If the company has appointed an auditor and if it occurs as a result of the resignation of the auditor, it shall be considered as a casual vacancy of the auditor, then such appointment shall be filled by the Board of Directors within thirty days and such appointment shall be approved by the Company at a general meeting to be convened within three months from the recommendation of the board of directors, and performs his function until the end of the general meeting.

In the case of Government Companies, the casual vacancy shall be filled by the Comptroller General of India within thirty days, if the Comptroller General of India does not appoint within the said period, the vacancy shall be filled by the Board of Directors within thirty days.

Final words

An auditor is appointed in companies under Section 139 of the Companies Act 2013. The provisions governing the appointment of an auditor for a public business are stricter than the provisions governing the appointment of an auditor for a private company. For example, a listed firm cannot select an individual as an auditor for more than five consecutive years. In addition, an auditing company cannot serve as an auditor of a publicly listed company for more than two terms of office, i.e. five consecutive years.