Appointment of Auditor

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29 December 2009 Respected experts,
Can any one guide me on what is the procedure for appointment of Auditor by the private limited company?

Ankur Garg

Ankur Garg (Expert)
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29 December 2009 APPOINTMENT OF AUDITORS

Section 224 governs the appointment of auditors. The auditors are to be appointed by the shareholders of the company in an annual general meeting by passing an ordinary resolution. Kindly note appointment of Statutory under section 224(1) is an ordinary business read with Section 173 of the Companies Act, 1956.

First auditors are to be appointed by the Board of directors within one month of the date of registration of the company as per section 224(5).

APPOINTMENT OF FIRST AUDITORS

As per section 224(5), the first auditor or auditors of a company shall be appointed by the Board of directors within one month of the date of registration of the company; and the auditor or auditors so appointed shall hold office until the conclusion of the first annual general meeting. Following provisions are related to the matter:

(i) Appointment of first auditors in general meeting.â€”A company in general meeting may appoint the first auditor or auditors if the Board of directors fails to exercise its power of appointment of first auditors within one month of the date of incorporation of the company.

(ii) Appointment of first auditors through Memorandum and Articles of Association.â€”The Institute of Chartered Accountants of India has expressed its opinion vide Compendium of Opinion Volume No. 1 that the appointment of first auditors through the Memorandum and Articles of Association of the newly floated private company is not a valid appointment.

(iii) Removal of first auditors.â€”The company may, at a general meeting, remove first auditor(s) or all or any of such auditors and appoint in his or their places any other person or persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than fourteen days before the date of the meeting.

(iv) Tenure of office of the first auditor.â€”The first auditor(s) shall hold office until the conclusion of the first annual general meeting of the company and then be eligible for re-appointment.

Ankur Garg

Ankur Garg (Expert)
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29 December 2009 APPOINTMENT OF OTHER THAN FIRST AUDITORS

Section 224(1) state that every company shall, at each annual general meeting, appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting.

Appointment of auditor shall be an ordinary business
As per section 173(l)(a)(iv) of the Act, the appointment of, and the fixing of the remuneration of the auditors shall be an ordinary business to be transacted at an Annual General Meeting of a company. Only an ordinary resolution is to be passed for this purpose by the shareholders.

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