Procedure for Appointment of Auditor Other than Retiring Auditor

Aakanksha Singhal

Aakanksha Singhal

Published on: Sep 23, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

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Introduction

Every Company incorporated in terms of the provisions of Companies Act, 2013 requires to get their financial records reviewed and verified by qualified professionals. Thus, after incorporation companies shall ensure appointment of a qualified auditor in terms of the provisions of Companies Act, 2013. Every company appoint its first auditor by Board within 30 days from Incorporation and if Board fails to do so then members of Company appoint first auditor at Extra-ordinay general meeting within 90 days till the conclusion of First Annual General Meeting. At first Annual General Meeting an auditor appointed who shall be an individual or a hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting.

Applicable Provisions:

1. Section 96, 100, 139, 141 & 169 of Companies Act, 2013
2. Rule 3, 4 & 10 of the Companies (Audit and Auditors) Rules, 2014
3. Regulation 29, 30, 44 and 46 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

This usually happens when

• an individual auditor who has completed his one term of five consecutive years, shall not be eligible for re-appointment as auditor in the same company for five years from the completion of his term.
• an audit firm which has completed its two terms of five consecutive years, shall not be eligible for re-appointment as auditor in the same company for five years from the completion of such term. A Company shall appoint any Individual or Firm other than Retiring Auditor after the expiry of tenure of Existing Auditor.

Mandatory Requirements

1. Obtain recommendations from the Audit Committee, if any with respect to all the appointments, including the appointment of auditor other than retiring auditor.
2. Special Notice shall be required for a resolution at an Annual General Meeting appointing as auditor a person other than a retiring auditor and also stats that retiring auditor shall not be re-appointed.
3. The Auditor shall also have to indicate/declare in the certificate that it satisfies the criteria provided in section 141 of the Companies Act, 2013. [Section 141 read with Rule 4 & 10 of the Companies (Audit and Auditors) Rules, 2014]
4. Consider the Qualifications and Experience of the Proposed Auditor. If a company has Audit Committee, then the committee otherwise the Board will consider the qualification and experience of the proposed Auditor. They will also consider any order or pending proceeding relating to professional matters of conduct against the proposed auditor before the Institute of Chartered Accountants of India or any competent authority or any Court. [Section 139(11) and Rule 3 (1) of the Companies (Audit and Auditors) Rules, 2014]

Following Procedure is to be followed

1. Special Notice sent by the Members to the Company
   • Members of the Company shall send a special notice to the company for appointment of auditor other than retiring auditor, not earlier than 3 months but at least 14 days before the date of meeting at which it is to be moved, excluding the day on which notice is served and the day of meeting.
   • On receiving this notice, company shall send a copy thereof to the retiring auditor.
   • The retiring auditor makes a representation in writing to the company and requests its notification to members of the company.
   • The company shall, unless the representation is received by it too late for it to do so
     • in any notice of the resolution given to members of the company, state the fact of the representation having been made.
     • send a copy of the representation to every member of the company to whom notice of the meeting is sent, whether before or after the receipt of the representation by the company.
     And if a copy of the representation is not sent as aforesaid because it was received too late or because of the company’s default, the auditor may (without prejudice to his right to be heard orally) require that the representation shall be read out at the meeting.
2. Convene General Meeting [Section 96, 100 and SS-2]
   Please refer to the Procedure for Conducting Extraordinary General Meeting (EGM) for the detailed procedure.
   • Company shall give the notice of the resolution along with the representation from the retiring auditor, to its members at least 7 days before the date of the meeting, excluding the day of dispatch of notice and day of meeting, in such a manner as it gives notice of any general meeting.
   • Where it is not practicable to give the notice in the same manner as it gives notice of any general meetings, the notice shall be published at least seven days before the meeting, exclusive of the day of publication of the notice and day of the meeting, in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated and such notice shall also be posted on the website of the Company.
   • Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
   • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
   • Hold the Annual General Meeting on fixed day and pass Special Resolution for appointment of auditor other than retiring auditor after giving the opportunity of being heard to the retiring auditor.
   • Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall submit disclosure in connection with the appointment of auditor to the Stock Exchange within 24 hours from the declaration of result of the meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall submit to the stock exchange the details of the voting results within two working days from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
   • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
3. File Form MGT-14 with ROC
   File Form MGT-14 with the ROC within 30 days of passing Board Resolution in the Board Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and requisite documents.
   • Certified True Copies of the Special Resolution passed along with Explanatory Statement.
   • Copy of the Notice of meeting sent to members along with all the annexure
   • Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice.
   • Copy of Attendance Sheet of General Meeting
   • Any other attachment as may be applicable.
4. Filing Notice of Appointment with ROC
   The Company shall inform the Auditor so appointed about the appointment and file a notice of such appointment with the Registrar in E-Form ADT-1 within 15 days of the general meeting along with the following attachments:
   • Certified true copy of the Special Resolution passed in the AGM
   • Intimation/Offer Letter given by the Company to the Auditor
   • Consent Letter given by the Auditor to the Company
   • Certificate given by the Auditor to the Company.