Appointment of First Auditor
Any company requires the fulfillment of its financial accounts and accounting dealings in accordance with the accurate laws. It is the duty of an auditor to keep a track on the modifications that are amended now and then. The auditor follows the provisions cited in Companies Act 2013 Act and ensures that the company is conforming to the existing set of laws. According to 139(6) of Companies Act 2013, in case of any Private Limited company as well as a One Person Company, it is mandatory to employ the first auditor in the duration of 30 days from the date of incorporation in a board gathering. However, when the directors of the board fail to assign an auditor, then within 90 days in a general meeting of members, the first auditor has to be appointed. The first auditor has to hold an office till the termination of opening annual general meeting. Though the Companies Act 2013 does not demand to file of any ROC, however since it is a prerequisite of law, it has to be fulfilled in time.
Requirements to become the Auditor of Company
As per as the existing laws only those individuals are eligible to become an auditor of a company who follows certain procedures.
- An active Chartered Accountant is eligible to become an auditor of a company.
- Intimate the anticipated auditor or auditors concerning the purpose of appointment, and inquire whether the person is entitled and not ineligible to be selected as the company auditor.
- A consent and certificate from the auditor have to be procured.
- A board meeting has to be summoned.
- The employment of auditor at the first Board Meeting has to be sanctioned.
- Intimate the auditor and maintain the reports appropriately in ROC file.
- In 15 days of selection of an auditor, ADT-1 has to be filed with the registrar of companies.
- Obtain consent and certificate from auditor.
- Sanctioning of the appointment of auditor at the first Board Meeting.
As per the Companies (Audit and Auditors) Rules sanctioned in 2014, the announcement of the selection of auditor is to be recorded with the Registrar in Form ADT-1. Presently, there are no e-forms accessible for filing the ADT-1 form with the Registrar. It is necessary that the form is suitably filled up as well as signed by a certified person on behalf of the company. Additionally, the form needs to be scanned and assigned with the e-form GNL-2. Finally, the form will be filed with the Registrar of Companies. While filing the ADT-1 form for notice of employment of auditors, the necessary information needed for filing are as follows: The Rule 4 of the Companies (Audit and Auditors) Rules states that prior to the appointment of the auditor, the company has to acquire a certificate from the auditor. This includes information such as-
- Firstly, the Corporate identity number or CIN or Foreign company registration number, also known as FCRN of the company is required. Moreover, the Global Location Number or GLN of the company is required.
- Secondly, the name of the company should be mentioned. In addition, the address of the listed office or the primary location of the business in India should be mentioned. The e-mail ID of the company should be provided.
- Next, the date when the meeting is held and at which the auditor appointed should be given.
- Thereafter, the category of Auditor whether Individual or Firm should be provided.
- Next, the Income Tax PAN of Auditor or the firm of auditor’s should be present.
- The name of the auditor or auditor’s firm should be there. Moreover, the membership number of auditor or auditor’s firm’s registration number should be provided. The address of the auditor or auditor’s firm, the city, the State, the Pin code and the Email id of the auditor or auditor’s firm should be present.
- Additionally, the Company has to hand out a Board Resolution sequentially to approve a person to sign the form and submit the ADT-1 form with the registrar.
- The date along with the number of decision empowering an individual to sign and submit the form is to be stated in the e-form.
- It is mandatory to acquire a written consent from the auditor of his keenness to be chosen as an auditor. This should be done prior to the appointment of auditor.
- The entity or the firm is entitled to appointment and is not ineligible for employment under the Act, the Chartered Accountants Act, 1949 in addition to the rules or regulations pre-existing.
- Moreover, the anticipated appointment should be with the Act.
- The pre-arranged appointment should be set within the restrictions as decided upon by the authority of the Act.
- The list of actions adjacent to the auditor or any partner or audit firm awaiting with respect to professional matters of management, which are revealed in the certificate is accurate.
- The ADT-1 form requires being filed in the duration of 15 days of the meeting where the auditor is appointed. In case of failure of filing form ADT-1 later than 15 days of appointment; a late fee will be imposed.
Powers endowed to Auditors
An auditor of a company is entitled to admittance continually to the report of account and vouchers of the company. The account report can either be registered at the office of the company or at other locations. The auditor has the right to ask the officers of the company the details and clarification as he deems fit. The auditor thereafter will construct a report about the accounts examined and present it to the members of the company. He will report about individual financial statements as mentioned in the Act. The report will be presented at the general meeting in front of the board after taking the provisions of this Act into due consideration.
Thus, In conclusion, “appointment of the first auditor” should be done properly by a company. In addition, when an auditor, do not meet the terms of the provisions, it is considered as a punishable offense where a penalty of one lakh rupees is imposed, which can exceed to twenty-five lakh rupees.