The appointment of an auditor is a crucial legal requirement under the Companies Act, 2013. Every company registered in India must appoint a qualified auditor to ensure transparency and accuracy in financial reporting. Auditors verify the company’s financial statements, ensuring compliance with accounting standards and legal obligations.

Appointment of the Auditor

1. First Auditor

    a. The first auditor of a newly incorporated company must be appointed by the Board of Directors within 30 days from the date of incorporation.

    b. If the Board fails to appoint within this period, the company’s shareholders must appoint the auditor within the next 90 days at an Extraordinary General Meeting (EGM).

2. Subsequent Auditors

    a. Subsequent auditors are appointed by the shareholders at the Annual General Meeting (AGM).

    b. The auditor’s term is typically one year but can be renewed or reappointed for successive terms as per the company’s decision.

Eligibility Criteria for Appointment

As per Section 139 of the Companies Act, 2013, the following conditions apply:

    1. The auditor must be a Chartered Accountant (CA) in practice.

    2. A firm of CAs can also be appointed as the auditor.

    3. The auditor must be independent and not hold any direct or indirect interest in the company.

    4. The individual or firm must not have any disqualification under Section 141 of the Act.

Types of Auditor Appointments

1. Statutory Auditor

    a. Every company, whether private or public, must appoint a statutory auditor to audit financial statements annually.

    b. Companies meeting certain turnover or capital thresholds may have auditors appointed or approved by the Central Government.

2. Internal Auditor

    a. Certain classes of companies (based on turnover, paid-up capital, or borrowings) must also appoint an internal auditor to monitor internal controls and operational efficiency.

Procedure for Appointment

    1. Board Resolution: Board meeting is held to approve the appointment.

    2. Consent Letter: Obtain a written consent and eligibility certificate from the proposed auditor.

    3. Shareholder Approval: Appointment confirmed through an ordinary resolution at the AGM.

    4. Filing with ROC: The company must file Form ADT-1 with the Registrar of Companies (ROC) within 15 days of appointment.

Removal or Resignation of Auditor

    1. An auditor can be removed before the expiry of their term by passing a special resolution and obtaining approval from the Central Government.

    2. The auditor may also resign by submitting a written notice to the company and filing Form ADT-3 with the ROC.

Documents Required

    1. Board resolution copy.

    2. Consent letter from the auditor.

    3. Eligibility certificate.

    4. Notice and resolution passed at AGM/EGM.

    5. Incorporation documents (MOA & AOA).

    6. Form ADT-1 submission acknowledgment.

Importance of Auditor Appointment

    1. Ensures financial transparency and accuracy.

    2. Builds investor and stakeholder trust.

    3. Helps identify financial irregularities early.

    4. Ensures compliance with statutory audit requirements.

    5. Protects the company from potential legal or tax risks.

How xLegal Helps

At xLegal, we provide end-to-end assistance with the appointment of auditors in your company.
Our expert team handles:

    1. Preparation of resolutions and notices.

    2. Filing of Form ADT-1 and documentation with ROC.

    3. Guidance on eligibility and compliance requirements.

    4. Complete legal and procedural support from start to finish.

Need expert assistance? xLegal Team provides end-to-end support for this, Contact us at +91 9319661668, info@xlegal.in