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The appointment of Auditor In a public limited is one of the regulatory requirement which every company has to comply within the prescribed time period. In this article, we will discuss the appointment of an auditor in a public limited company.
Table of Contents
An auditor is responsible for assessing the validity and consistency of a company’s financial statements. An auditor provides a report to the Company at the conclusion of the audit which determines the level of accuracy and clarity that the organization has accounted for.
In accordance with section 139(1) of the Companies Act, 2013 read with Rule 3 of Companies (Audit and Auditors) Rules, 2014 every company shall at the 1st Annual General Meeting (AGM), appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting (AGM) & after that until the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as prescribed.
The Board or the Audit Committee (where it is required to be constituted) shall consider the qualifications, experience of the auditor and whether the aforesaid attributes are proportionate with the scope and requirements of the company. Further regard should also be given to professional matters of conduct against the proposed auditor before the ICAI, Court or any competent authority.
The procedure depends upon whether the audit committee is required to be constituted or not.
In this case, the committee shall recommend the name of the auditor to the Board which if agrees with the recommendation, will further recommend it to the members. If the Board doesn’t agree on the same, which shall then refer back the recommendation to the committee which may reconsider its recommendation, however, if the committee decides not to do so then the Board shall record reasons for its disagreement with the committee and send its own recommendation for consideration of the members.
Listed company or all unlisted public companies having paid up share capital of ₹ 10 crore or more, all private limited companies having paid up share capital of ₹ 20 crore or more, all companies having public borrowings from financial institutions, banks or public deposits of ₹ 50 crores or more shall not appoint or re-appoint an individual as auditor for more than one term of 5 consecutive Years; and an audit firm as auditor for more than two terms of 5 consecutive years.
The Auditor who has resigned from the company will have to file form ADT-3 within a period of 30 days from the date of resignation, a statement in the prescribed form with the company and ROC indicating the reasons and other facts as may be relevant with regard to his resignation in Form ADT-3.
The Act prescribes several such essential responsibilities for auditors and thereby giving enough liability and the role of the auditors to perform as per the rules set by the Act.
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