Procedure for Appointment of Subsequent Auditor of the Company

Aakanksha Singhal

Aakanksha Singhal

Published on: Dec 3, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

★★★★★(31 Rating)

41822

Introduction

Every Company shall appoint an individual or a firm as an auditor who shall hold office from the conclusion of its sixth Annual General Meeting and thereafter till the conclusion of every sixth meeting. [Section 139(1)]

Applicable Provisions:

1. Section 139 & 141 of Companies Act, 2013
2. Rule 4 & 10 of the Companies (Audit and Auditors) Rules, 2014

Mandatory Requirements

1. No listed company or unlisted public companies having paid up share capital of rupees ten crore or more or private limited companies having paid up share capital of rupees fifty crore or more or companies having paid up share capital of below threshold limit mentioned above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores shall appoint or re-appoint
   • an individual as auditor for more than one term of five consecutive years
   • an audit firm as auditor for more than two terms of five consecutive years.
2. The Auditor shall also have to indicate/declare in the certificate as mentioned-above 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]
3. 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. Obtain written consent and Certificate from the Proposed Auditor [Section 139(1) & Rule 4(1) of the Companies (Audit and Auditors) Rules, 2014]
   Company shall receive before such appointment is made, the written consent of the auditor to such appointment and a certificate from him or it that the appointment, if made, shall be in accordance with the conditions. The Auditor shall submit a certificate
   • that 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 thereunder
   • that the proposed appointment is as per the term provided under the Act
   • that the proposed appointment is within the limits laid down by or under the authority of the Act
   • that 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.
2. Obtain recommendations for re-appointment from the Audit Committee [Section 139 (11), 177]
   Where a Company is required to constitute an Audit Committee under section 177, shall receive a recommendation from the committee for the re-appointment and remuneration of the Auditor. [For convening meeting of Audit Committee, Refer the Procedure for Conducting Audit Committee Meeting]
3. Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-1)]
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
   • Hold a meeting of Board of Directors and pass Board Resolution
     • to consider and recommend the appointment/re-appointment of Auditor for a period of 5 years
     • to fix the day, date, time and venue of the Annual General Meeting (AGM) and to approve the draft notice convening the AGM along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013 and authorize the Director or Company Secretary to sign and issue notice of AGM.
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
4. Convene Annual General Meeting [As per Section 96 and Secretarial Standard-2 (SS-2)]
   • Notice of General Meeting shall be given at least clear 21 days before the actual date of a Annual General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
   • Notice will be sent to all the Directors, Members and Auditors of Company, to the Secretarial Auditor, to 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 a shareholder’s meeting on the fixed date and pass the Ordinary Resolution for appointment/re-appointment of the Auditor for a period of 5 years and shall fix the remuneration to be paid to the 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 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].
5. Filing Notice of Appointment with ROC
   The Company shall inform the Auditor so appointed about the appointment/re-appointment and file a notice of such appointment with the Registrar in E-Form ADT-1 within 15 days of the general meeting. [Section 139(1) and Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014] along with the following attachments
   • Certified true copy of the Ordinary 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.