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Each year, a company is required to use form ADT-1 to notify the Registrar of Companies (ROC) about the appointment of its Auditor in accordance with the prescribed procedure. According to section 139(1) of the Companies Act, 2013, informing the ROC about the appointment of an auditor is compulsory when a company appoints one. This information must be submitted within 15 days of the company's annual general meeting or first board meeting.
Appointment of an Auditor under the Companies Act, 2013
Under Section 139 of the Companies Act, 2013, only certain individuals and firms are eligible to be appointed as auditors. The key eligibility criteria are:
Chartered Accountant: The person appointed as an auditor must be a Chartered Accountant (CA) holding a valid certificate of practice.
Firm of Auditors: If a firm is appointed as an auditor, the majority of partners should be qualified Chartered Accountants.
Independence: The auditor must be independent, meaning they should not have any direct or indirect interest in the company, its holding or subsidiary, or its associated companies.
Eligibility Criteria for auditors appointment
Certain individuals or firms are disqualified from being appointed as an auditor. These include:
Body corporate other than an LLP.
An officer or employee of the company.
A person who is a partner or employee of an officer or employee of the company.
A person who has a business relationship with the company exceeding the specified threshold.
A person convicted of fraud or having certain ethical issues.
Disqualifications for Appointment as Auditor (Section 141)
Appointment at the First Annual General Meeting (AGM):
At the company’s first AGM, shareholders appoint the auditor, who will hold office from the conclusion of that meeting until the conclusion of the sixth AGM (i.e., for a term of five years).
The company must file a notice of appointment with the Registrar of Companies (ROC) within 15 days of the meeting using Form ADT-1.
Appointment in Casual Vacancy (Section 139(8)):
If there is a casual vacancy in the office of the auditor (due to resignation or other reasons), the Board of Directors can appoint an auditor within 30 days, and the appointment must be approved by the shareholders within three months of the Board’s decision.
If the vacancy arises due to the resignation of the auditor, the new auditor will hold office until the conclusion of the next AGM.
Procedure For Appointment Of Auditors
Copy of Board Resolution
A certified true copy of the Board Resolution passed for the appointment of the auditor must be attached. This resolution serves as proof that the Board has approved the appointment of the auditor.
Consent Letter from the Auditor
A letter from the appointed auditor indicating their consent to act as the auditor of the company is required. The letter should clearly state that the auditor is willing to accept the appointment and is eligible under the provisions of the Companies Act, 2013.
Certificate from the Auditor (Eligibility Confirmation)
A certificate from the auditor confirming their eligibility and that the appointment meets all the legal requirements under Section 141 of the Companies Act, 2013. This certificate also confirms that the auditor is not disqualified under the disqualification criteria laid down in the Act.
Copy of the Appointment Letter
A copy of the appointment letter or communication from the company to the auditor, formally notifying them of their appointment, should be attached.
Documents Required to be filed with Form ADT-1
Should I file ADT 1 for the first auditor?
Yes, filing Form ADT-1 for the appointment of the first auditor is recommended and is a good practice.
What is ADT 1?
When to file ADT 1?