Appointment, Removal & Role of an Auditor of a Private Limited Company

Posted by Enterslice on February 12th, 2018

Appointment of Auditor:

In case the first auditor of the company is appointed by the Board of Directors then there is no need of giving any notice or intimation to the Registrar regarding the appointment of the auditor of a Private Limited Company

Concept Regarding Appointment of Auditor:

  1.  

Which Section will apply for appointment of First Auditor

Section 139(1)

  1.  

Who will Appoint First Auditor

Board of Directory By Passing Board Resolution in Board Meeting

  1.  

Time Limit for Appointment of First Auditor

Within 30 days from Incorporation of Company

  1.  

Who will Appoint Fist Auditor if Board of Director Fails to Appoint First Auditor

Members of Company by Passing of Ordinary Resolution in Extra Ordinary General Meeting

  1.  

What is the Tenure of Office of First Auditor?

First Auditor may hold office until conclusion of First Annual General Meeting

  1.  

Whether the First Auditor can be removed before holding the First Annual General Meeting, If that auditor is appointed in Board   Meeting.

Yes, By Board of Directors.

  1.  

Whether First Auditor can be removed before First Annual General Meeting, If that auditor is appointed in General Meeting.

Yes, by Members of Company by Passing of Special Resolution, After obtaining the previous approval of Central Government in that behalf.

  1.  

Whether the First Auditor of the company can be appointed through AOA & MOA.

No, the Appointment of First Auditor by the Articles of Company will not be considered as valid.

Removal of Auditor:

The procedure regarding removing the auditor has been given under Section 140 of Companies Act 2013.  As per the Companies Act 2013, the auditor can be removed before the completion of his term.

If the appointing company is not satisfied with the service of the auditor the company can start the process of removal of the auditor as stated under section 140.

Any auditor appointed under section 139 can be removed from his office before the expiry of his tenure for which he was appointed only by a special resolution of the company, and that special resolution shall be passed after obtaining the previous approval of the Central Government in that behalf in that prescribed manner.

An application to the Central Government for removal of the auditor shall be made in Form ADT-2 and that shall be accompanied with the prescribed fees. This applies to the Central Government shall be made to the Central Government within 30 days of the passing of the resolution by the Board of Directors. 

As per point No.3 of ADT-2 following information required to mention while filing the form:

     i.        Service request number of Form MGT-14

    ii.        Date of filing the form

   iii.        Date of passing the special resolution

For obtaining the approval of Central Government the company is required to file E-Form ADT-2 and ADT-2 and these forms can only be filed after mentioning the date of EGM, SRN of MGT-14 and the copy of the Minutes of General Meeting.

Role of Auditor:

  • Internal Control.
  • Financial Review.
  • Regulatory Monitoring.
  • Objective role in ensuring that the shareholders' interests are well protected.
  • To prepare and present the financial statements in accordance with applicable financial reporting framework including its design, implementation, and maintenance of the internal control which are relevant to the preparation and presentation of financial statements that are free from material misstatements, whether from the error or fraud.

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Enterslice

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Enterslice
Joined: December 20th, 2017
Articles Posted: 48

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