Appointment of Auditor at AGM (Procedure & Resolution)

Appointment of Auditor at AGM comes under the Section 139(1) of Companies Act 2013. The Following article is an detailed explanation of Appointment of Auditor at AGM and Procedure for Appointment of Auditor at AGM under the Companies Act 2013. Appointment of Subsequent Auditor in case of every company except Government Company or company owned/ controlled by Central G/SG/CG and SG. Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor of the company.

Introduction

Section 141 (1) & (2) of the Act prescribed the following eligibility and qualifications of auditor which are as under:-

  1. Only a Chartered Accountant (individual) or a firm where majority of partners practicing in India are Chartered Accountants can be appointed as auditor.
  2. Where a firm including a limited liability partnership (LLP) is appointed as an auditor of a company, only the partners who are chartered accountants shall be authorized to act and sign on behalf of the firm.

Appointment of Auditor at AGM

Appointment of auditor shall be made by members at First AGM and every subsequent 6th AGM. At the first AGM, every company shall appoint an individual or a firm as an auditor. The auditor so appointed shall hold office from the conclusion of first AGM till the conclusion of 6th AGM.

After the 1st AGM, when any appointment of auditor is made at any AGM, the auditor so appointed shall hold office till the conclusion of 6th AGM, with the AGM wherein such appointment has been made being counted as the 1st AGM.

At every AGM (viz. 2nd, 3rd, 4th and 5th AGM), the appointment of auditor shall be ratified by the members. If at any AGM, the appointment of auditor is not ratified by the members, the Board of Directors shall appoint another individual or firm as its auditor(s) after following the procedure laid down under the Act [Explanation to Rule 3(7)].

Simply speaking, if the appointment is not ratified at any AGM, the auditor shall have to vacate his office and such vacancy shall amount to casual vacancy. The Board shall fill such casual vacancy in accordance with sub-section (8) of section 139.

Procedure for Appointment of Auditor at AGM

The manner and procedure of selection of auditors by the members of the company at any AGM has been specified under rule 3 of Companies (Audit and Auditors) Rules, 2014.

  1. The qualification and experience of the individual or the firm proposed to be appointed as auditor shall be considered by –
    1. The Board; or
    2. The audit committee, in case the company is required to constitute an Audit committee.
  2. While considering the appointment, the Board/Audit Committee shall have due regard to-
    1. Any order of professional misconduct passed against the proposed auditor; and
    2. Any proceedings of professional misconduct pending against the proposed auditor.
  3. The Board/Audit Committee may call for such other information from the proposed auditor as it may deem fit
  4. In case the company is not required to constitute the Audit committee, the Board shall consider and recommend an individual or a firm as auditor to the members in the AGM for appointment.
  5. In case the company is required to constitute the Audit Committee, following procedure shall be adopted:
    1. The audit committee shall recommend the name of an individual or a firm as auditor to the Board for consideration.
    2. If the Board agrees with the recommendation of the audit committee, it shall further recommend such individual or such firm as auditor to the members in the AGM for appointment.
    3. If the Board dis agrees with the recommendation of the audit committee, it shall refer back the recommendation to the audit committee for reconsideration citing reasons for such dis agreement.
    4. If the audit committee, after considering the reasons given by the Board, decides not to reconsider its original recommendation, and the Board continues to disagree with the recommendations of the audit committee, the Board shall –
      1. record reasons for its disagreement with the committee
      2. send its own recommendation for consideration of the members in the AGM;
    5. If the audit committee, after considering the reasons given by the Board, decides not to reconsider its original recommendation, and the Board agrees with the recommendations of the audit committee, the Board shall recommend the name of the individual or the firm as recommended by the Audit committee to the members in the AGM for appointment.
    6. The appointment will be considered at the duly convened annual general meeting of the company and the necessary resolution be passed.
    7. In case of listed company, the copies of notices and copy of proceedings of annual general meeting be forwarded promptly.
    8. The auditor must be intimated of his appointment and certified copy of resolution of appointment must be sent to the auditor.
    9. Then, company is required to file a notice about the appointment of auditor(s) with the Registrar in form ADT-1 along with filling fees and necessary enclosures within 15 Days of the meeting.

Draft Resolution Appointment of Auditor at AGM

RESOLVED THAT pursuant to provisions of Section 139, 142 and other applicable provisions of the Companies Act, 2013, if any, read with the Companies (Audit & Auditors) Rules, 2014, including any statutory enactment or modification thereof, M/s. ________________, Chartered Accountant, (Firm Registration No. _________________) be and is hereby appointed as the Statutory Auditors of the Company and to hold the office from the conclusion of this ____________Annual General Meeting till the conclusion of ____________Annual General Meeting of the Company, subject to ratification as to the said appointment at every Annual General Meeting, at a remuneration to be decided by the Board of Directors in consultation with the Auditors plus applicable service tax and reimbursement of travelling and out of pocket expenses incurred by them for the purpose of audit

Conclusion

The above all the information Prepared on the basis of the Relevant Provisions under the Companies Act 2013. For better Understanding Cross check the Companies Act 2013. For any doubts and quarries comment below.