PVT LTD COMPANY
AUDITOR APPOINTMENT
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OVERVIEW
AUDITOR APPOINTMENT
A proper book of accounts must be kept and regularly audited for all registered businesses, including private limited companies, one-person businesses, and limited liability companies. Hence, upon a company’s incorporation, the Company’s Board of Directors must choose an auditor. If the directors fail to appoint the first auditors for the company within 30 days of the date of registration, the shareholders may do so within 90 days of incorporation.
Various types of auditors that a company appoints
- First Auditor
- Internal Auditor
- Subsequent Appointment of Auditor
- Secretarial Auditor
- Cost Auditor
DOCUMENTS
DOCUMENTS REQUIRED
- A transaction that is supported by a due diligence audit is more likely to succeed.
- The due diligence audit will reveal anything wrong throughout the transaction.
- It improves the information's quality, which will assist you reach to a wise decision.
- Form MGT-14
- Board meeting resolution
- The ROC must also receive the following information in addition to the form mentioned above.
- New auditing firm’s name.
- New auditor firm’s address.
- Email id
- PAN number.
- The duration of time that the firm has been hired.
- Information on the departing auditor firm.
- Date of the new auditing firm’s appointment.
- Form ADT-1 with a digital signature (along with the signature of the company’s director).
FIRST AUDITOR'S APPOINTMENT
PROCESS OF FIRST AUDITOR'S APPOINTMENT
- The Auditor in this role will hold office through the conclusion of the initial Annual General Meeting.
- The company must deliver Form ADT-1 and the necessary funds to the Registrar of Companies.
- If the company is publicly traded, the auditor general of India and comptroller will appoint the first Auditor within 60 days of the company's incorporation date.
- If the comptroller general of India does not do so within the allotted time, the company's board of directors will do so within the following 30 days.
- If the board does not do so within the next 30 days, the company shall appoint the Auditor itself.
- The First Auditor shall hold office until the conclusion of the First Annual General Meeting.
The steps to take in order to designate an auditor other than the First Auditor
- In a general meeting, the company's members must elect auditors (other than the original auditors).
- The general meeting's Auditor assumes office immediately following the meeting, and the current meeting will be the newly appointed Auditor's first audit meeting.
- However, within three months of the board's recommendation date, members' permission must be obtained if a temporary vacancy in an auditor's office results from registration.
- The Auditor chosen at the meeting will keep working until the following annual general meeting.
- The company shall file ADT-1 within 15 days after the appointment of the successor auditor.
CASUAL VACANCY
WHAT IS A CASUAL VACANCY, AND HOW IS ONE CREATED IN THE AUDITOR'S OFFICE?
The casual vacancy could result from an auditor’s resignation, death, disqualification, etc. Section 139(8) of the 2013 Companies Act regulates the appointment of an auditor to fill a temporary vacancy. In the case of an auditor, the concept of a casual vacancy can be divided into two scenarios:
- The auditor’s resignation before the end of his term
- Any circumstance other than resignation, such as a death or exclusion
Procedure for an Auditor Appointment in casual vacancy due to resignation
Suppose an auditor leaves his position prior to the end of his term of appointment. In that case, the Board of Directors must fill the resulting casual vacancy within 30 days, and the appointment must be approved by the Extraordinary General Meeting or Annual General Meeting, which must be called within three months of the date of the Board’s recommendation. The auditor in question will serve in that capacity until the end of the following annual general meeting.
The procedure for appointing a new auditor to replace a resigning auditor is outlined below.
Step 1:
Get the resignation letter and statement in Form ADT-3 that have been properly filed with the Registrar of Companies by the resigning auditor.
Step 2:
Receive a Consent Letter from the new auditor and an eligibility certificate attesting to his suitability for the position.
Step 3:
Issue notice to all Directors at least 7 days before the board meeting date to fill the casual auditor vacancy after receiving the new auditor’s consent for an appointment and eligibility certificate. The Board of Directors’ nomination is subject to confirmation by the membership at the upcoming general meeting, which will take place in three months. The Board Meeting must be scheduled no later than 30 days after the resignation’s effective date.
Step 4:
After the Board confirms the appointment, the newly appointed auditor will get notification of the appointment by letter along with a copy of the board resolution.
Step 5:
Provide notice to the company’s members that a general meeting will be held within three months of the date the Board made its recommendation. Hold the general meeting to approve the auditor’s appointment.
Step 6:
Submit Form ADT-1 to the Registrar of Companies along with the required attachments and fees within 15 days of the date of appointment in a general meeting.
APPOINTMENT AT GENERAL MEETING
APPROVAL OF APPOINTMENT AT GENERAL MEETING
The appointment of an auditor by the Board to fill a casual vacancy must be approved by the Members at a General Meeting called within three months after the Board’s recommendation, according to Section 139(8)(i) of the Companies Act, 2013. Either the annual general meeting or an extraordinary general meeting may be held.
An Ordinary Resolution must be passed, and Form ADT-1 should be filed within 15 days of the Annual General Meeting if approval is requested. The auditor will be chosen to serve from the end of that AGM to the end of the sixth AGM, which will be conducted later.
The members should pass a special resolution by calling an Extraordinary General Meeting if the approval is requested. Within 30 days following the EGM date, the Special Resolution must be filed with the Registrar in Form MGT-14. The auditor in question will serve until the following annual general meeting concludes.
Steps that the resigning auditor must take:
It is crucial to keep in mind that, in accordance with Section 140(2) of the Companies Act, 2013, the departing auditor must submit Form ADT-3 with the Registrar within 30 days of the date of departure and then give the company a lawfully filed copy of Form ADT-1.
PROCEDURE
PROCEDURE FOR AN AUDITOR APPOINTMENT IN CASUAL VACANCY DUE TO DEATH
If the death of an auditor brings about the casual vacancy, the Board of Directors must replace it within 30 days, and the auditor so appointed will serve until the end of the following annual general meeting.
Step 1:
Send a notification letter to the potential auditor in order to secure a letter of consent and an eligibility certificate attesting to his qualifications and readiness for employment.
Step 2:
Provide notice to all directors at least 7 days prior to the date of the board meeting to fill the vacancy after receiving the new auditor’s consent for appointment and eligibility certificate.
Step 3:
Send the auditor an appointment letter and a copy of the board resolution.
Step 4:
Submit Form ADT-1 within 15 days of the appointment date.
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