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    Appointment of Auditor

    All the companies registered like private limited company or one person company or limited company are required to maintain proper book of accounts and get the book of accounts audited. Therefore, after incorporation of a company, an Auditor must be appointed by the Board of Directors of the Company. First auditors of the company must be appointed within 30 days of date of registration of the company by the Directors, if not the shareholders can appoint first auditors within 90 days of incorporation. In this article, we look at the requirement and procedure for appointment of auditor.

    Procedure for Appointment of Auditor

    Only a practising Chartered Accountant can be an Auditor of a Company. Before appointment of auditor of company, the written consent of the auditor must first be obtained along with a certificate from the Auditor that the appointment, if made, shall be in accordance with the conditions as prescribed by the Auditor and that the Auditor satisfies the criteria provided in Section 141 of the Companies Act, 2013 (Provision relating to audit and auditor).

    Once the consent of an Auditor is obtained, then the Board of Directors of the Company can execute a resolution to appoint the Auditor. The appointment of auditor must be conveyed to the Registrar of Companies within fifteen days of appointment. The first auditor can hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting. However, the company should place the matter relating to appointment of auditor for ratification by members at every annual general meeting.

    Failure to Appoint Auditor

    In case of failure of the Board of Directors to appoint an Auditor, within 30 days of incorporation of company, then the Board should inform the members of the company about the failure to appoint Auditor. The members can then within 90 days at an extraordinary general meeting, appoint and auditor and the auditor would hold office till the conclusion of the first annual general meeting.

    If in case, at any annual general meeting, no auditor is appointed or re-appointed, then the existing auditor of the company would continue to be the auditor of the company.

    Auditor Appointment for Listed Company

    The provisions relating to Auditor appointment for a listed company are more stringent than appointment of auditor for a private company. For instance, a listed company cannot appoint an individual as auditor for more than one term of five consecutive years. Also, an audit firm cannot be appointed as Auditor of a listed company for more than two terms of five consecutive years.

    Power and Duties of Auditor of the Company

    An Auditor of the Company must be an independent person engaged by the Company for the purpose of expressing an opinion on whether the financial statements prepared by the company are free of material misstatements, fraud or error and inline with the Accounting Standards. It is important to note that it is the responsibility of the Company to maintain book of accounts and prepare financial statements of the Company. The Auditor of the Company cannot maintain the Book of Accounts of the Company or prepare financial statements of the Company, as it would impair his/her independence.

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