Sec 139 of the Companies Act 2013 provides that every company shall appoint an individual or firm as an auditor of the company at the first AGM . The person so appointed shall hold the office from the conclusion of the AGM in which he was appointed till the conclusion of the sixth AGM. Although the auditor will hold the period for a period of 5 years but the matter relating to such appointment for ratification by the member shall be placed at each AGM.
Before appointing a person as an auditor of the company shall obtain a written consent and a certificate that if the appointment is made then it will be in accordance with the conditions as may be prescribed, from the auditor.
After appointing the person as an auditor the company shall inform the auditor as well the Registrar within 15 days from the date of the meeting in which the auditor was appointed.
The auditor so appointed cannot be reappointed for more than one term of 5 consecutive years. If the auditor is individual and if the auditor is a firm then it can’t be reappointed for more than 2 terms of 5 consecutive years. The individual auditor as well as a firm who has completed their respective terms of 5 consecutive years shall not be reappointed as an auditor in the same company for five years from the date of completion of his terms. In case a person is a partner in two audit firms and if one of these audit firms has already completed the tenure of audit for a particular company then the another firm of which that person is a partner can’t do the audit of that particular company also. Both the firms cannot be appointed as an auditor of that company.
However no provisions of this section will take off the right of the company to remove an auditor or the right of the auditor to resign from the company.
The time period boundation of 5 consecutive years and 10 consecutive years as the case may be applies to following class of companies:
For the purpose of rotation of auditor, the period for which the individual or the firm has held the office prior to the commencement of the act will be taken into account for calculating the period of 5 years or 10 consecutive years.
Incoming auditor or the audit firm shall not be eligible if the auditor or the audit firm is associated with the outgoing auditor or the audit firm under the same network. Same network means the firms working under the same brand name, trade name or common control.
If a person who is a partner in an audit firm and also certifies the financial statement of the company retires from the said firm and joins another firm such other firm will also be ineligible for a period of 5 years.
This section provides that the First Auditor will be appointed by the BOD within 30 days from the date of registration of the company.
In case BOD fails to appoint the auditor within such time then they shall inform the members of the company regarding such failure.
Now the member will appoint the auditor at an extraordinary general meeting within 90 days . The auditor so appointed shall hold the office till the conclusion of first AGM.
Casual Vacancy in case of other companies shall be filled by BOD within 30 days. However if the casual vacancy is due to resignation then such vacancy shall be approved by the company at general meeting convened within 3 months of the recommendations of the BOD .It means in case of casual vacancy through resignation also can be filed by the BOD but the approval of the shareholders are required in that case.
The person so appointed for filling the casual vacancy in both the cases shall hold the office till the conclusion of next AGM.
In case of the company where the auditor is appointed by C&AG , the casual vacancy will be filled by the C&AG within 30 days. In case the casual vanacy is not filled by the C&AG then the BOD will fill the vacancy within next 30 days.
Before appointing a person as an auditor of the company shall obtain a written consent and a certificate that if the appointment is made then it will be in accordance with the conditions as may be prescribed, from the auditor.
After appointing the person as an auditor the company shall inform the auditor as well the Registrar within 15 days from the date of the meeting in which the auditor was appointed.The auditor so appointed cannot be reappointed for more than one term of 5 consecutive years. If the auditor is individual and if the auditor is a firm then it can’t be reappointed for more than 2 terms of 5 consecutive years. The individual auditor as well as a firm who has completed their respective terms of 5 consecutive years shall not be reappointed as an auditor in the same company for five years from the date of completion of his terms. In case a person is a partner in two audit firms and if one of these audit firms has already completed the tenure of audit for a particular company then the another firm of which that person is a partner can’t do the audit of that particular company also. Both the firms cannot be appointed as an auditor of that company.
However no provisions of this section will take off the right of the company to remove an auditor or the right of the auditor to resign from the company.
The time period boundation of 5 consecutive years and 10 consecutive years as the case may be applies to following class of companies:
- Listed Company
- Unlisted public company having paid up share capital of Rs. 10 crore or more
- All private limited companies having paid up share capital of Rs. 20 crore or more
- All companies having paid up share capital of below threshold limit mentioned in (a) and (b) above but having public borrowing from financial institutions, banks or public deposit of Rs. 50 crore or more.
For the purpose of rotation of auditor, the period for which the individual or the firm has held the office prior to the commencement of the act will be taken into account for calculating the period of 5 years or 10 consecutive years.
Incoming auditor or the audit firm shall not be eligible if the auditor or the audit firm is associated with the outgoing auditor or the audit firm under the same network. Same network means the firms working under the same brand name, trade name or common control.
If a person who is a partner in an audit firm and also certifies the financial statement of the company retires from the said firm and joins another firm such other firm will also be ineligible for a period of 5 years.
Sec 139(5)
Irrespective of the provisions mentioned above, the audit of the GOVT Company shall be appointed by the C&AG of India within a period of 180 days from the commencement of the year who shall hold the office till the conclusions of the general meeting.
Sec 139(6)
This section provides that the First Auditor will be appointed by the BOD within 30 days from the date of registration of the company.
In case BOD fails to appoint the auditor within such time then they shall inform the members of the company regarding such failure.
Now the member will appoint the auditor at an extraordinary general meeting within 90 days . The auditor so appointed shall hold the office till the conclusion of first AGM.
SEC 139(7)
The first auditor of the Govt Company shall be appointed by the C&AG of India within 60 days from the date of registration of the company. If the C&AG of India fail to appoint the auditor within such time period then BOD will appoint the first auditor with next 30 days. In case BOD also fails to appoint within such time then the appointment of auditor will be done by the member of the company at Extraordinary general meeting within next 60 days .The person so appointed shall hold the office till the conclusion of first AGM.Sec 139(10)
This section provides that where at any AGM is not appointed or reappointed then the existing auditor shall continue to be the auditor of the company.Sec 139(8)
Casual vacancy in case of Govt Company shall be filed by the C&AG of India within 30 days. In case the C&AG fails to appoint within such time period then BOD will fill the vacancy within next 30days.Casual Vacancy in case of other companies shall be filled by BOD within 30 days. However if the casual vacancy is due to resignation then such vacancy shall be approved by the company at general meeting convened within 3 months of the recommendations of the BOD .It means in case of casual vacancy through resignation also can be filed by the BOD but the approval of the shareholders are required in that case.
The person so appointed for filling the casual vacancy in both the cases shall hold the office till the conclusion of next AGM.
In case of the company where the auditor is appointed by C&AG , the casual vacancy will be filled by the C&AG within 30 days. In case the casual vanacy is not filled by the C&AG then the BOD will fill the vacancy within next 30 days.
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