As per section 139(6) of Companies Act 2013, a Private Limited Company has to appoint an Auditor within 30 days from the date of incorporation of the company in the presence of all the board members. If all the directors of the governing body are not able to appoint the auditor then it has to be executed within 90 days in a general meeting of members.

The first Auditor has to hold the position in office till the end of the first annual general meeting.

Who is an Auditor?

An auditor is a qualified individual who is trained to review and verify accounting data of a company. The person has to be recognised as a Chartered Accountant (CA) as per the Chartered Accountant Act 1949 and can be deemed as an Auditor.

What is the purpose of the appointment of the Auditor?

The main purpose of an Auditor in a company is to protect the interests of the shareholders of the company. The auditor is bound by the law to examine and maintain the accounts and update the directors about the financial state of the company.

Rules for Appointment of Auditor for a Private Limited Company:

• Procedure: - Only a practicing Chartered Accountant is eligible to be the Auditor of a company.

The proposed auditor(s) has to be intimated with an intention of appointment of an auditor and asked if he is eligible for the position.

The consent letter and certificate have to be obtained from the Auditor.

The appointment of the Auditor has to be approved at the first Board Meeting.

• Remuneration: – As per section 142(1) remuneration of the auditor of a company shall be fixed in its general meeting in presence of the Directors.
• The written consent and certificate from the auditor: -   As per 2nd proviso to section 139(1) an auditor has to provide written consent to become the auditor of the company and a certificate stating that appointment is done according to the conditions provided.
• Intimation to Auditor & ROC: - The Auditor has to be informed regarding the appointment through the filing of a form ADT-1 to the ROC within 15 days of the general meeting.

Powers and duties of auditors: The Auditor has every right to access all the books of account and voucher of the company and shall be entitled to ask any information and explanation from the directors as he feels necessary for the performance of his duty as an auditor.

The auditor shall make an annual account report to the members of the company on the accounts examined by him and submit that on time.

Penalty: If any auditor, cost accountant or company secretary in practice does not comply with the provisions he shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees.

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