Appointment of Auditors

After incorporation of a company, an Auditor must be appointed by the Board of Directors. Term of 1st auditor is till the conclusion of 1st AGM and thereafter at every 6th AGM. Before the appointment of the Auditor, a written consent along with Certificate must be obtained from the CA, that he/she is eligible for appointment as Auditor of a company and that the proposed appointment is in accordance with the Companies Act. The appointment of First Auditor of the Company must be completed by the Board of Directors within 30 days of incorporation.

Change of Auditor

Auditors must be rotated or changed periodically every 5 years by the company to maintain compliance with the Companies Act, 2013. In such cases, special notice is required expressly stating that a retiring auditor shall not be re-appointed for a resolution at an Annual General Meeting for appointing as Auditor a person other than a retiring Auditor. Based on the special notice, the Auditor can make a representation in writing to the company, accepting the change or contesting, as the case maybe.

Rotation of Auditors

While rotating Auditors of a company, the following points must be taken in to account by the Board of Directors:

• In case of an auditor, the period for which he has held office as auditor prior to the commencement of the Act shall be taken into account for calculating the period of five consecutive years or ten consecutive years, as the case may be.
• The incoming auditor or audit firm shall not be eligible if such auditor or audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms
• Break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation.
• If a partner, who is in charge of an audit firm and also certifies the financial statements of the company, retires from the said firm and joins another firm, such other firm shall also be ineligible to be appointed for a period of five years.