appointment of auditor according to sec 139 of companies act,2013

1. APPOINTMENT OF AUDITOR
(According To Section 139 of Companies
Act,2013 )

2. QUALIFICATION OF AUDITOR
{ ACC. TO SEC (141) }
Who is eligible to
act as an auditor of
a company?
Only a CA (individual or firm)
can be appointed as auditor,
Where a firm including a LLP is
appointed as auditor, only the
partner who are CA shall be
authorized to act & sign on
behalf of firm.

3. DISQUALIFICATION OF AN AUDITOR
( ACC TO SEC. 143 )
 Auditor’s relative being director or KMP.
 An employee/officer of the company.
 Convicted for 10 years.
 Auditor in more than 20 companies.
 A body corporate other than LLP registered under the LLP
act, 2008.
 A person whose relative is in the employment of the
company as a director or key managerial person.

4. EXAMPLE
Mr Amit, a practicing CA, is holding securities of X ltd.
Having a face value of rupees 200. Whether Mr Amit is
qualified for appointment as an auditor or not?
As per sec 143(d), an auditor is disqualified to be
appointed as an auditor if he, or his relative or partners
holding any security of or interest in the company or its
subsidiary.
In the present case, Mr A is holding security of rupees
200 in the X ltd., Therefore he is not eligible for
appointment as an auditor.

6. Company appoint an auditor at the first annual
general meeting who hold office for next 5 year
till the conclusion of 6th AGM.
Every year in the AGM ratification by
shareholder is required.
EXPLANATION:– For the purposes of this
chapter, “appointment” include re-
appointment.
SUB SEC (1)

7. RULE 4 OF COMPANIES
( AUDIT & AUDITORS) RULES,2014
The auditor appointed shall submit a certificate to
registrar that :-
(1) The individual or firm is eligible for appointment
under the CA act,1949 and the rules & regulation
made thereunder.
(2) The list of proceeding against the auditor pending
with respect to professional matter of conduct is true
& correct.
(3) The proposed appointment is as per the term provided
under the act.

8. SUB SEC (2)
No listed companies
or
Classes of companies
Appoint an individual
as auditor for more
than 1 term of five
consecutive years
Appoint an audit
firm as auditor for
more than 2 term of
five consecutive
year

9. RULE 5 OF COMPANIES (AUDIT &
AUDITORS) RULES,2014
Class of companies
means(excluding one
person & small
companies)
All unlisted companies
having paid-up share
capital of rupees 10 crore
or more
All private Companies
having paid up share
capital of 20 crore or more
All companies having
share capital below the
case (a) & (b),but having
public borrowings of 50
crore or more

10. SUB SEC (3)
Member of a company may resolve to provide that:-
(A) in the audit firm appointed by it, the auditing
partner & his team shall be rotated as such interval as
may be resolved by member ;or
(B) the audit shall be conducted by more than one
auditor.
SUB SEC (4)
The central govt. May, by rules, prescribe the manner in
which the companies shall rotate their auditor in
pursuance of sub sec(2).
The word “firm” shall include a limited liability partnership

11. RULE 6 OF COMPANIES (AUDIT &
AUDITORS RULES, 2014
 The audit committee shall recommend to the board,
the name of an individual auditor or of an audit firm
who may replace the incumbent auditor on expiry of
the term of such incumbent.
 Where a company is required to constitute an audit
committee, the board shall consider the
recommendation of such committee, and in other
cases, the board shall itself consider the matter of
rotation of auditor and make its recommendation for
appointment of next auditor in next AGM.

12. SUB SEC (5)
In the case of a govt. Company or any other
company owned or controlled, directly or indirectly,
by the central govt. And partly by one or more state
govt. , The comptroller & auditor general of
India shall, in respect of a financial year, appoint
as an auditor of companies under this act, within
a period of 180 days from the commencement of
the financial year , who shall hold office till the
conclusion of the annual general meeting.

13. In a company other than govt.
co. First auditor will be
appointed by board of
directors with in 30 days of
registration of the company
• But in case
of failure,
With in 90 days, the
members of company at an
extra ordinary general
meeting appoint an auditor
SUB SEC (6)

14. EXAMPLE
Managing director of ABC ltd. Himself want to appoint Mr
Mehra, a practicing CA as the first auditor of the company.
PROVISION & EXPLANATION :- According to sec 139(6)
of the companies act 2013 “the first auditor of a company shall
be appointed by the board of directors within 30 days of
registration of company “. in the instant case, the appointment of
Mr Mehra as an first auditor is violation of sec 139(6).
CONCLUSION :- The M.D. Of ABC ltd. Have no right to
appoint the first auditor of a company.

15. SUB SEC (7)
{ IN CASE OF GOVERNMENT COMPANIES }
• First auditor
shall be
appointed by
C&AG of
India within 60
days
But in case
of failure,
• The board of
directors shall
appoint such
auditor within
the next 30
days
But in case
of failure
• Members of
company shall
appoint such
auditor within
60 days at an
extra ordinary
general meeting

16. EXAMPLE
The first auditor of ABC ltd. ,A govt.
Company, was appointed by the board of
directors.
PROVISION & EXPLANATION :- Acc. To
section 139 (7), first auditor shall be
appointed by comptroller & auditor general of
India within 60 days.
CONCLUSION :- Thus, the appointment of
first auditors made by the board of directors
of abc ltd. Is void.

17. SEC 139(8)
[ CASUAL VACANCY TO BE FILLED BY ]
In case of govt.
Co.
(By C&AG in
30 days)
• In case of
failure then,
BOD will
appoint an
auditor
with in
next 30
days
Other than
govt. Co.
DUE TO
RESIGNATION
(appointment by
bod should be
approved by co.
at agm)
Other reason
(by bod within
30 days)

18. SUB SEC (9)
RETIRING
AUDITOR
MAY BE RE-
APPOINTED
Not disqualified
for re-
appointment
Not give a notice
of his
unwillingness to
be re-appointed
Special
resolution has
not been passed

19. SUB SEC (10)
Where at any general meeting no auditor is
appointed or reappointed, the existing auditor shall
continue to be the auditor of company.
SUB SEC (11)
Where a company is required to constitute an audit
committee under sec 177, all appointments,
including the filling of casual vacancy of an auditor.
Under this section shall be made after taking into
accounts of recommendation of such committee.