Procedure For Appointment of Auditor under Companies Act 2013

     

Procedure For Appointment of Auditor under Companies Act 2013

The manner and the procedure of selection of auditors has been specified under rule 3 of Companies (Audit and Auditors) Rules, 2014.

Consideration of Qualification and experience for the appointment as auditors by the Audit Committee/Board:

In the case of a company that has constituted an Audit Committee under section 177, the audit committee and in other case; the Board shall take into consideration, the qualifications and experience of the person proposed to be considered for appointment as an auditor and whether these are commensurate with the size and requirements of the company. While considering the appointment, the Board or audit committee shall have due regard to:

(a)     Any order of professional misconduct passed against the proposed auditor ; and

(b)  Any proceedings of professional misconduct pending against the proposed auditor before the Institute of Chartered Accountants of India or the National Financial Reporting Authority or Tribunal or any Court of law. [Rule 3(1)]

Following procedure is required for Appointment of Auditor

1. The qualification and experience of the individual or the firm proposed to be appointed as auditor shall be considered by –

(a)      The Board; or

(b)  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-

(a)      Any order of professional misconduct passed against the proposed auditor; and

(b)   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:

(a)  The audit committee shall recommend the name of an individual or a firm as auditor to the Board for consideration.

(b)  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.

(c)   If the Board disagrees with the recommendation of the audit committee, it shall refer back the recommendation to the audit committee for reconsideration citing reasons for such disagreement.

(d)   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 –

(i)     record reasons for its disagreement with the committee

(ii)      send its own recommendation for consideration of the members in the AGM;

(e)    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 the appointment.

(f)   The appointment will be considered at the duly convened annual general meeting of the company and the necessary resolution be passed.

6.  In the case of listed company, the copies of notices and copy of proceedings of annual general meeting be forwarded promptly.

7.  The auditor must be intimated of his appointment and a certified copy of the resolution of appointment must be sent to the auditor.

8.   Then, company is required to file a notice about the appointment of auditor(s) with the Registrar  in  form ADT-1 along with filing fees and necessary enclosures within 15 Days of the meeting.

Related Post :

Draft Resolution for Appointment of Statutory Auditor under Companies Act 2013

Board Resolution For Ratification of Auditor

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