Appointment of First Auditor: Process, Documents, Fees & Timeline
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Appointment of First Auditor: Process, Documents, Fees & Timeline
Every company has shareholders, and safeguarding their interests is one of the most important factors in building a reliable and transparent organization. This protection is ensured through the appointment of an auditor, who plays a crucial role in maintaining financial integrity and compliance within the company. Accordingly, the first auditor must be appointed within 30 days of the company’s incorporation. The auditor carries significant duties and responsibilities, and their appointment involves specific procedures and documentation. BizCatalyst Technologies can assist you throughout this process, making the appointment of an auditor simple, efficient, and hassle-free.
Who is an Auditor?
An auditor is an individual or a firm appointed by an organization to conduct an audit and evaluate its internal controls. An auditor is an independent professional whose appointment is mandated under the provisions of the Companies Act, 2013. The primary purpose of appointing an auditor is to safeguard the interests of shareholders, verify the accuracy of financial records, and ensure the company’s compliance with applicable laws and regulatory requirements.
Who Appoints the First Auditor of a Company?
The first auditor of a company is appointed by its Board of Directors. The Board is required to make this appointment within 30 days from the date of incorporation by passing a board resolution. Further, the company must file Form ADT-1 with the Registrar of Companies (ROC) within 15 days of appointing the first auditor.
Eligibility for Appointment as an Auditor
The Companies Act, 2013 places significant emphasis on the credibility and independence of an auditor. To ensure that audits are conducted by competent professionals with the necessary expertise, the Act prescribes specific eligibility criteria for appointment as an auditor. Since an audit serves as a key mechanism for detecting discrepancies and potential fraud within a company, it is essential that only qualified individuals or firms undertake this responsibility.
A person is eligible to be appointed as an auditor if:
(a) He or she is a qualified Chartered Accountant (CA); and
(b) He or she holds a valid Certificate of Practice (COP).
In the case of an audit firm, the firm is eligible for appointment if the majority of its partners are Chartered Accountants holding a valid Certificate of Practice (COP).
Role and Responsibilities of Auditor
An auditor performs several important roles and responsibilities within a company, including:
Verifying the accuracy and authenticity of the company’s financial statements
Ensuring compliance with applicable laws, rules, and regulatory requirements
Examining the establishment, adequacy, and effectiveness of internal control systems
Conducting the statutory audit in accordance with prescribed standards
Understanding and reviewing the company’s internal rules, policies, and procedures
Preparing and submitting the audit report
Providing unbiased and independent professional advice to help improve business operations
Collecting, analysing, documenting, monitoring, and reporting the company’s financial information
Process for the Appointment of First Auditor
The appointment of the first auditor of a company is carried out through the following step-by-step process:
Step 1: Selection of the Auditor
The company must identify and select a suitable auditor to be appointed as the first auditor. At this stage, the auditor’s qualifications, professional experience, and eligibility under the Companies Act, 2013 should be carefully evaluated.
Step 2: Obtain Auditor’s Consent
Written consent must be obtained from the proposed auditor, confirming their willingness to accept the appointment and acknowledging their responsibilities.
Step 3: Passing of Board Resolution
After receiving the auditor’s consent, a meeting of the Board of Directors is convened. The Board approves and finalizes the appointment of the auditor by passing a formal board resolution.
Step 4: Intimation to the Auditor
Once appointed, the auditor must be officially informed through a letter of appointment issued on the company’s letterhead.
Step 5: Filing with the Registrar of Companies (ROC)
The company is required to file Form ADT-1 with the Registrar of Companies within 15 days from the date of passing the board resolution, along with the prescribed filing fees.
Fees for Appointment of First Auditor
| Share Capital | Filing Fee |
|---|---|
| Less than ₹1,00,000 | ₹200 |
| ₹1,00,000 to ₹4,99,999 | ₹300 |
| ₹5,00,000 to ₹24,99,999 | ₹400 |
| ₹25,00,000 and above | ₹500 |
Professional Fee:
The professional fee for the appointment of the first auditor is ₹999 (excluding GST).
Documents Required for Appointment of First Auditor
The following documents are required for appointing the first auditor:
- Certified true copy of the Board Resolution
- Written consent from the auditor
- Appointment letter issued to the auditor
These documents ensure proper authorization, acceptance, and statutory compliance for the appointment process.
Time Taken for Appointment of First Auditor
The appointment of the first auditor is a mandatory compliance requirement for every company. The entire process of appointing the first auditor generally takes around 10 to 15 days, provided all documents and filings are completed accurately and on time.
