Chapter X - Audit & Auditors (Section 139 to Section 148)
Section 139 (Appointment of Auditors)
1. Appoint at first annual general meeting who shall continue up to conclusion of 6th AGM
• Ratification by members at every AGM
• Written consent from Auditor before appointment, which shall be a certificate. He may mention conditions for appointment.
• Certificate shall specify that auditor satisfies criteria provided in section 141
• Company shall inform the auditor about appointment. It shall file notice with registrar within 15 days of such meeting.
2. Listed companies & prescribed companies cannot appointment an individual auditor for more than 1 term of 5 consecutive years AND an audit firm for more than 2 terms of 5 consecutive years.
• Prescribed companies are –
i. all unlisted public companies having paid up share capital of rupees ten crore or more;
ii. all private limited companies having paid up share capital of rupees twenty crore or more;
iii. all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.
• An individual auditor or audit firm after completion of such term shall have freeze period of 5 years.
• Outgoing & Incoming Auditor cannot have common partner.
• A break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation [Rule 6]
• Period prior to the commencement of this act shall be taken into account for calculating such period.
• This sub section has to be complied within 3 years.
3. Members may resolve to rotate the auditing partner & his team or audit being conducted by more than 1 auditor.
4. Central Government shall prescribe in rules the manner for rotation of auditors as per sub-section (2)
5. Auditor in Government Companies shall be appointed by C & AG within 180 days from start of Financial Year
6. First auditor shall be appointed by Board of Directors, within 30 days from date of registration OR if not complied then, by members within 90 days in an EGM. He shall hold office up to conclusion of 1st AGM.
7. In case of Government Companies, C&AG within 30 days, else BOD within next 60 days, else Members in next 60 days in an EGM shall appoint first auditor.
8. In case of Casual Vacancy –
• BOD shall appoint Auditor within 30 days; if Casual vacancy is due to resignation of Auditor, then such appointment has to be approved in General meeting within 3 months.
• In case of Govt. Company, C&AG within 30 days, else BOD in next 30 days.
9. Retiring Auditor may be reappointed if he is not disqualified, he is not unwilling & company has not appointed any other auditor with a special resolution.
10. If no auditor is appointed or re-appointed, the existing auditor shall continue.
11. If Company is required to appoint audit committee under section 177, all appointments have to be done in their consultation.
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