It is inevitable that 'dynamic environment demands constant changes'. One of such change had been made in the Companies Act by notifying the Companies Act, 2013.
In the present article we deal with the provisions of the 2013 dealing with the Auditors of the Company. The auditors of a company play a vital role towards the stakeholders of such company. The Auditors are required to audit the books of accounts of the company and report to the shareholders regarding the affairs of the Company which are carried out by the directors of the Company in the fiduciary capacity.
The provision related to auditors in the 2013 Act contains drastic changes as compared to the 1956 Act. The important one is defining the role of Auditors.
This article contains the description of some provisions related to auditors which have been modified in companies Act, 2013.
Appointment of FIRST AUDITOR in case of every company except govt. company or company owned/ controlled by CG/SG/CG and SG [139(6)]:-
• The First auditor of a company, other than a Government Company, shall be appointed by the BOARD OF DIRECTORS WITHIN THIRTY DAYS OF THE DATE OF INCORPORATION of a company. The auditor so appointed, shall hold office until the conclusion of the first annual general meeting.
• IF THE BOARD FAILS to appoint the first auditor, it shall inform the MEMBER of company, who shall within 90 days at an Extra Ordinary General Meeting shall appoint auditor.
{There is different view of different persons, persons have view that No time period is mentioned for Board to inform the members about the Non appointment of first auditor.}
But According to my VIEW: If the Board fails to appoint the First Auditor, an Extra Ordinary General meeting will be called by the Board to appoint the first auditor within 90 days of incorporation.
In case of appointment of First auditor by Board of Director of company pursuant to section 139(6), company is under no obligation to give notice to appointment of First Auditor to the Registrar. THERE IS NO NEED TO FILE ANY FORM WITH ROC FOR APPOINTMENT OF FIRST AUDITOR.
For the company incorporated after 01st April, 2014 first Auditor shall hold office until the conclusion of the first annual general meeting of company.
APPOINTMENT OF AUDITOR AT FIRST ANNUAL GENERAL MEETING (AGM):
Every company shall at First Annual General meeting (AGM) appoint an individual or firm as an Auditor to hold office from the conclusion of that meeting till the conclusion of the sixth (6th ) Annual General Meeting (AGM).
The duration of auditor of company will be term of consecutive Five (5) years each for Individual and Two terms of Consecutive Five (5) years in case of Auditor Firm.
** BUT the provision of 5 Year and 10 year will not applicable on One Person Company and Small Companies as per Rule-5 The Companies (Audit and Auditor) Rules, 2014.
MATTER IN RESPECT OF FIRST APPOINTMENT AT AGM:-
A. Rectification at Every Annual General Meeting (AGM):- [First Proviso of Section-139 (1)]
Although the duration of office is Five (5) years and Ten (10) years, the company will place the matter for ratification at every AGM.
LANGUAGE OF NOTICE OF AGM (ORDINARY BUSINESS):
RESOLVED THAT Auditor or Auditor Firm, Chartered Accountants (Registration No.---------------), who retire at the conclusion of this Annual General Meeting, be and are hereby re-appointed as Statutory Auditors of the Company till the conclusion of the next Annual General Meeting at a remuneration to be fixed by the Board of Directors of the Company and billed progressively.
B. CONSENT AND CERTIFICATE FROM AUDITOR:- [Second Proviso of Section-139 (1)]:
Documents Require from Auditor before Appointment in AGM
a. WRITTEN CONSENT of auditor for such appointment.
b. CERTIFICATE from auditor for such appointment.
c. Under Rule 4 of Chapter-X, Auditor shall state in said certificate that he satisfy the condition given below: (Third Proviso of Section- 139(1);
• The individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made there under;
• The proposed appointment is as per the term provided under the Act;
• The proposed appointment is within the limits laid down by or under the authority of the Act;
• The list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
ACCORDING TO ME COMPANY SHOULD ISSUE LETTER TO AUDITOR FOR HIS APPOINTMENT – FORMAT ATTACHED
C. INTIMATION TO AUDITOR & NOTICE TO REGISTRAR :- [Fourth Proviso of Section-139 (1)]:
The Company shall with in Fifteen (15) Days of Annual General Meeting (AGM) :
a. Inform the Auditor of his Appointment.
b. File Notice of such appointment with ROC in Form- ADT-1 [Attach form ADT-1 in E-Form-GNL-2 ] and file with ROC (As per MCA Circular No. 09/2014 dated April 25, 2014.
*Earlier auditor used to file Form 23B and inform ROC, now the company is to inform ROC, so in a way they shifted the burden to inform on Company.
Appointment of first auditor in case of govt. company or company owned/ controlled by CG/SG/CG and SG139 (7):-
Appointment of first auditor shall be made by CAG within 60 days of registration of the company. If CAG fails to appoint the first auditor within given time then Board of such company shall appoint first auditor within 30 days. If Board fails to appoint the first auditor within given time then it shall inform to members and members shall make the appointment of first auditor within 60 days of information at an EGM. The First Auditor shall hold office till the conclusion of first AGM.
YOU MAY SEE THE FOLLOWING TABLE SHOWING THE RELEVANT PROVISIONS RELATING TO APPOINTMENT OF FIRST AUDITOR OF COMPANY.
Date
Address of the Auditor/firm
Dear Sirs
Sub: (Re-)appointment as Statutory Auditors of the Company.
With reference to the above subject, we wish to (re-)appoint you/your firm as the Statutory Auditors of the company.
Please let us know that you are duly qualified and eligible for this appointment as per the provisions of section 139 and 141 of the Companies Act, 2013 and rules made there under and your written consent to act as Statutory Auditors of the Company from the conclusion of ensuing Annual General Meeting to the ….th Annual General Meeting.
You are also requested to issue a certificate to the company under Section 139(1) of the Companies Act, 2013 on the following matters:
You/the firm satisfies the criteria provided under Section 141 of the Companies Act, 2013; the individual or the firm is eligible for appointment and is not disqualified for appointment under the Companies Act, 2013 the Chartered Accountants Act, 1949 and the rules or regulations made there under;
the proposed appointment is as per the term provided under the Companies Act, 2013 ; the proposed appointment is within the limits laid down by or under the authority of the Companies Act, 2013 ;
5. Details of any order or pending proceeding relating to professional matters of conduct against the auditor before the Institute of Chartered Accountants of India or any competent authority or any Court. and the list of proceedings against (you) or the firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
OTHER DRAFTS TO BE CONTINUED………………………………….
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