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Latest Rules for Appointment of Auditor Under Companies Act

Narendra Kumar

| Updated: Jul 27, 2017 | Category: Company Registration

Auditor Under Companies Act

Private Limited Company is one of the most popular forms of starting a business, once registered it gives access to a crucial benefit, one can add shareholders, raise loans, attract the best talent with equity among other things. To obtain such benefits one needs to comply with the rules and regulations under Companies Act, 2013, which starts from the date of incorporation. Therefore, it is essential to take help of a professional to ensure timely compliance of private limited company, in order not to attract any interest or penalty. In this article we described about Rules for Appointment of Auditor Under Companies Act.

The following table will help to elaborate some of the important / mandatorily compliances of a private limited company:

Compliance RequirementDescription and Timeline
Auditor’s AppointmentStatutory audit is needed for to determine whether a Company is providing a true and fair view of its financial condition by providing bank balance, financial transactions, etc. Hence, it is a mandatory requirement for every private Company.

 

Statutory audit is same as any other audit. As given under Companies Act, 2013 an auditor is the appointed for a term of 5 years. And in the case of new business, within one month of registration. Hence it is one of the important compliances of Private Limited Company.

Statutory Audit of AccountsFor every Private Limited Company, it is necessary to prepare its accounts and get the same audited by a Chartered Accountant. The Auditor will provide a report called an Audit Report and the Audited Financials for the purpose of filing it with the Registrar.
Filing of Annual(yearly) Return (Form MGT-7)Every Private Limited Company shall mandatorily file its Annual Return within a period of 60 days from the date of Annual General Meeting. Such annual return shall be for the period from 1st April to 31st March.
Filing of Financial Statements (Form AOC-4)Every Company is required to file its Balance Sheet along with the Statement of Profit and Loss Account and Director’s Report within 30 days from the date of holding of Annual General Meeting.
Holding Annual General MeetingEvery Company shall hold an Annual General Meeting every year within a period of 6 months from the date of closing of the Financial Year.
Preparation of Directors’ ReportA report from directors known as Director’s Report shall be prepared and all the information prescribed under the Companies Act 2013 shall be provided.
  

Statutory Auditors

Audit means of examination of accounting records undertaken with a view ensure that an organization is providing a true and correct view of its financial position to the shareholders. To broadly specify the purpose of a statutory audit is the same as the purpose of any other audit – to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records, and financial transactions.

  • Appointment of the Statutory Auditors[1] of the Company.
  • Finalize Annual Accounts with the Auditors of the Company

Annual Filings with the Registrar of Companies

  • It is a mandatory requirement for all companies to the Annual Accounts and Returns detailing all the information of its shareholders, directors etc to the Registrar of Companies. These compliances are required to be made once in a year.
  • As a part of Annual Filing, the following forms are to be filed with the Registrar of Companies:
    • Form AOC-4: All companies are required to file Balance Sheet along with a statement of Profit and Loss Account and Director Report in the form AOC-4 within 30 days from the date of holding its Annual General Meeting.
    • Form MGT-7 (Annual Return): Within 60 days from the date of holding its Annual General Meeting every Company shall file its Annual return within 60 days from AGM. Such annual return shall be for the period 1st April to 31st March.

Annual General Meeting

  • Annual General Meeting means a meeting of a shareholder of the Company. It is mandatorily required to be held every year. In the case of 1st Annual General Meeting, it should be held within 6 months from the date of closure of financial year. Annual General Meeting should not be held on the public holiday and it should be held during business hours and at the registered office of the Company.
  • The primary motto of AGM is to discuss certain essential topics like approval of financial statement, appointment, and salary of directors, dividend declarations. Etc.

Board Meetings

  • Meeting of Board of Directors is called as Board Meeting. The first board meeting should be held within 30 days from the date of incorporation of a Company.
  • The board should meet minimum 4 times in a year, and the interval between two such boards meetings should not exceed 120 days. There is an exception in the case of small companies, means there is an exception for startups because all start-ups are considered as small companies.
  • The quorum for such meeting should be two directors and if board consist of more than two directors than one-third of total directors should be present for a valid board meeting.
  • Minimum days’ notice in advance stating date and purpose of the meeting should be given to each Director.

Directors’ Report

Every director is under obligation to submit reports containing details about directorship in other companies every year. This is to be in writing and in the format prescribed.

Income Tax Compliance

Maintenance of Statutory Registers and Records

Some of the statutory registers and records required to be maintained by a Private Limited Company are Register of shares, Register of Members, Register of Directors etc. Apart from incorporation documents of the Company, all the resolutions passed at the meeting of the Board of directors, minutes of all meeting i.e. Board or Annual General Meeting should be maintained and preserved by the Company.

Such records are to be kept at the registered office of the company and shall be open for inspection to its members during business hours. Also, the statutory records and registration are required to be maintained for a period of eight years and in good order.

Other Event-Based Filings

There are certain event based compliance apart from the Compliance mentioned above, such as

  • Changes in share capital of the Company,
  • Giving loans to director or other companies,
  • Bank accounts – opening and closing,
  • Appointment of auditor or changes thereof any, etc.

These are some of the major compliance for a Private Limited Company in India. If the company fails to comply with any provisions of the Act there are penalties for every such noncompliance.

Read our article:Annual Compliance of a Public Limited Company: Rules and Procedures

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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