Appointment of First Auditor

Appointment of First Auditor of Company

Mandatory for all Companies in India
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The Companies Act makes it mandatory for the companies to appoint a Statutory Auditor to do the audit of the books of account of the company. The primary responsibility of appointing the Auditor is on the Board Of Directors. We shall support you in the appointment of first auditor for your company.

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    Appointment of First Auditor of Company

    The board of directors of the company is obligated to find a suitable Chartered Accountant who is in full-time practice as a CA and is eligible to take a fresh assignment of statutory audit for the company. Please note that a CA is not eligible for audit of your company if he is also providing his services for the purpose of accounting, consulting, or GST Return filing. In other words, to become an auditor of your company the CA must be an independent person and not involved in day-to-day accounting, tax, or any other manner.

    We maintain a pool of experienced and independent chartered accountants who are eligible to conduct an audit of the company under Section 139 of the Companies Act. You may avail our consulting service to find a suitable auditor in compliance with Section 139 to 148 of the Act. We shall be working closely with the Board of Directors of the company in the appointment of first auditor of the company.

    Points to Note on First Auditor Appointment

    Applicability On Companies

    The board of directors of every company irrespective of its capital and type must appoint a statutory auditor within 30 days of the incorporation of the company, However in case of failure on the part of directors the shareholders can appoint auditor within 90 days.

    Who can be appointed as Auditor

    Section 139 of the Companies Act, prescribes qualification and condition for appointment of auditor, according to it the auditor must be a Qualified Chartered Accountant with valid membership of ICAI and is not ineligible for doing audit.

    Auditor must be independent

    Audit of the company is a statutory requirement and it must be done by an Independent CA who is in full time practice and is not engaged in any other service directly or indirectly for the company or its holding company. Please refer section 144 of the Act or FAQ No 1 below.

    Intimation of Auditor Appointment

    The appointment of the auditor is required to be intimated to the registrar of companies by filing Form ADT-1 with prescribed fee within 15 days of appointment of the auditor. The first auditor appointment by the board of directors may not be intimated to ROC.

    Registration Process for Appointment of First Auditor

    1. Shortlisting of Qualified Auditor

    The process of auditor starts with the preparation of a list of possible auditors, who are a CA in full time practice and is eligible to do statutory audit under the companies act, 2013. Next the company should send a letter seeking their consent to act as statutory auditor of the company.

    2. Obtain Consent from the Auditor

    The auditor consent has to be in a proper format wherein a specific declaration shall be made that the audit assignment shall be within the limits prescribed and that the auditor is eligible for appointment and is not disqualified for appointment under section 141 of the Companies Act, 2013, the Chartered Accountant Act, 1949 and rules and regulations made thereunder.

    3. Hold Board Meeting to Appoint the Auditor

    The next step is to call a Board Meeting and decide about the appointment of the first auditor of the company and to fix the remuneration for the auditor, in general, one director is authorised to carry out the formalities of auditor appointment.

    4. Intimate Auditor of his appointment

    The decision of the board of directors meeting, confirming the appointment of the auditor must be communicated to the auditor by way of a formal letter on the letterhead of the company duly signed by the authorised director of the company.

    5. File ADT-1 (Optional for First Auditor)

    After approval of the RBI for the establishment of the branch office in India, an application for registration of branch office of the foreign company is filed in form FC-1 within 30 days of such approval. In case there are Indian directors the DIN number of such director is needed, and the digital signature of the authorised signatory is required to e-file statutory forms with the ROC for their approval.

    (All Inclusive)

    Appointment of First Auditor
    1,499.00 /

    (All Inclusive Govt. Fees)
    (*Inclusive of government fees and exclusive of Audit fees)

    Frequently Asked Questions

    Section 144 clearly lays down certain restrictions on the auditors to ensure independence and integrity on the part of auditor while discharging their responsibility as an auditor of the company. The law prescribes that an auditor must not engage in providing the below services to the company or its holding company, whether directly or indirectly

    • Accounting and bookkeeping services;
    • Internal Audit;
    • Design and Implementation of any financial information system;
    • Actuarial Service
    • Investment Advisory Services
    • Investment Banking Services
    • Rendering of outsourced financial services;
    • Management Services; and

    In other words, a statutory auditor must not do anything for the company other than the audit of the finalized final accounts of the company. The company is under responsibility to prepare the books of account and draft the balance sheet, profit, and loss account, other financial reports and give them to the auditor for expression of his opinion and Audit Report.

    The form ADT-1 is the prescribed e-form through which a company has to file an intimation to the ROC about the appointment of the auditor with the prescribed fee. The filing of ADT-1 is mandatory if the auditor is appointed by the General Meeting, however in case the appointment is through the board of directors meeting the filing of ADT-1 is not necessary.

    The form ADT-1 has to be filed within 15 Days of the appointment of the auditor.

    Yes, the general fee as prescribed under the rules are also applicable for filing the form ADT-1 and the fee is based on the authorised capital of the company. Below is the list of the filing fee for the declaration for the certificate of commencement of business.

    SI. No Authorised Capital (INR) INR
    1. Less than 1,00,000 200
    2. 1,00,000 to 4,99,999 300
    3. 5,00,000 to 24,99,999 400
    4. 25,00,000 to 99,99,999 500
    5. 1,00,00,000 or more 600

    Yes, you have the option of filing the intimation of auditor appointment in form ADT-1 even if the due date is missed, however with an additional fee to be paid based on the delay of the number of days from the due date. Below table is for reference to calculate additional fee.

    SI. No Delay Additional Fee as times of Normal filing fee
    1. Delay up to 30 Days 2 Times
    2. More than 30 days and up to 60 days 4 Times
    3. More than 60 days and up to 90 days 6 Times
    4. More than 90 days and up to 180 days 10 Times
    5. More than 180 days 12 Times

    for any contravention of the provisions of section 139 to 146 there is severe punishment prescribed in section 147 of the Companies Act, 2013 which is as under

    • The company is liable to minimum penalty of Rs. 25,000, which may extend to Rs. 5,00,000
    • Every officer of the company is liable to punishment in the form of imprisonment for a term of up to one year and a fine ranging from Rs. 10,000 to Rs. 1,00,000/- or with both
    • In case an auditor has contravened any provision then he is liable to punishment which shall be minimum of Rs. 25,000 and may go upto Rs. 5,00,000. However in case of any wilful contravention the punishment may include imprisonment of two years.

    Following are the documents which need to be prepared for appointment of the auditor of the company

    • Consent of the Auditor
    • Minutes of the Board Meeting
    • Extract of the Resolutions Passed at the Board Meeting
    • Letter to auditor of his appointment

    An auditor is appointed to do audit of the financial statements of a company on completion of the same the auditor has to issue an Audit Report expressing his independent opinion on the financial statements prepared by the company, whether or not it reflects true and fair view of the books of account and affairs of the company. The appointment of the auditor has to be done to meet the compliance requirements as prescribed under section 139 to 148.

    The ADT-1 is the statutory form which is filed with the ROC for the purpose of intimation of the appointment of the auditor of the company in general meeting. In case of the first auditor the appointment is done by the board of directors, hence the requirement of filing ADT-1 is not necessary, However as a matter of caution, you may choose to file ADT-1 as the law on this subject matter is not express.

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