Appointment of First Auditor of the Company

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Reading Time: 3 minutes| (Last Updated On: July 30, 2018)

Appointment of First Auditor of the Company

The compliance of company’s financial records and accounting procedures with the right laws is an inevitable prerequisite.   An auditor keeps a hawk eye on the changes that are revised from time to time in the provisions mentioned in 2013 Act with the purpose to ensure that the company is complying with the set of laws. Not only this, the auditing of the books of the company and representation and explanation of the affairs of the Company to the shareholders are also two of the major arenas that are covered and managed by the Auditor of a company. Appointment of first auditor of the company

Appointment of First Auditor of the Company

It’s significant to know that the provisions associated with the auditors in the 2013 Act have come up with substantial amendments as compared to those stated in the 1956 Act. Consequently, there are some provisions associated with the auditors for which the descriptions have been amended or revised in the companies Act, 2013.

When it comes to the appointment of the first auditor in a company, provided that  it’s not a government company or company owned/ controlled by CG/SG/CG and SG [139(6)]; Board of Directors appoint the First auditor of the company within thirty days of the date of incorporation for the period until the conclusion of the first annual general meeting of the company. Moreover, In case the board fails to appoint the first auditor of the company, the members of the company shall be informed, who shall further appoint the auditor within 90 days in an extra-ordinary general meeting.

Procedure of Appointing First Auditor of the Company.

  1. Intimate the proposed auditor(s) regarding the intention of appointing him/it as auditor and ask whether he/ it is eligible and not disqualified to be appointed as auditor of the company.
  2. Obtain consent & certificate from auditor.
  3. Call Board meeting.
  4. Approve the appointment of auditor at the first Board Meeting.
  5. Intimate the auditor and keep the records properly in roc file
  6. File ADT-1 within 15 days of appointment of auditor with the registrar of companies.

It is not obligatory for the company pursuant to section 139(6) to give notice of appointment of First Auditor of the company to the Registrar. (Note : Filing of ADT-1 is not mandatory as the first auditor is appointed under section 139(1) of the companies act 2013 which is silent on filing of ADT-1, However we recommend to file it, However in case company has failed to file ADT-1 within 15 days of appointment of auditors then it need not to be filed.)

Following are the relevant letters which need to be drafted by company / auditor

  1. Letter to auditor seeking eligibility to do audit of the company as first auditorof the company
  2. Format of consent to be the first auditor of the company
  3. Minutes of the board meeting appointing first auditor
  4. Letter to auditor confirming his appointment as first auditor of the company

Following are the sample board resolution which a company may adopt while appointing the first auditor of the company

“RESOLVED THAT pursuant to the provisions of Section- 139(6) and other applicable provisions, if any, of the Companies Act, 2013 and the Rules framed there under, as amended from time to time, M/S ________, Chartered Accountants, be and is hereby appointed as First Auditor of the Company to hold office from the conclusion of this meeting till the conclusion of the 1 st AGM of the Company to be held in the year 2016, at such remuneration as may be agreed upon between the Board of Directors and Statutory Auditors, in addition to the reimbursement of service tax and actual out of pocket expenses incurred in relation with the audit of accounts of the Company

RESOLVED THAT Mr. ___________be and is hereby authorized to file ADT-1 and other form and document to ROC and other regulatory authority, if necessary.”

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