Appointment of Auditor under Companies Act, 2013

When you start or run a company, one important thing you must do is appoint an auditor. An auditor checks your company’s financial records to ensure everything is in order and legal. In India, the Companies Act, 2013 explains clearly how companies should appoint an auditor.

MGT-8 Applicability and Certification by Practising Company Secretary Share If you run a private limited company in Rajasthan or anywhere else in …

What is Form MGT-7 and why is it important for companies?

CA Jitendra Agarwal
•
Company & LLP

What is form MGT-7 and why is it important for companies? Share Every company in India — whether a Private Limited Company, …

Form DIR-8 and MBP-1 Filing Guide for Company Directors

CA Jitendra Agarwal
•
Company & LLP

Form DIR-8 and MBP-1 Filing Guide for Company Directors Share In India, corporate governance requires directors of Private Limited Companies, Public Limited …

How to Open a Current Bank Account for a Private Limited Company in India?

CA Jitendra Agarwal
•
Company & LLP

How to Open a Current Bank Account for a Private Limited Company in India? Share A current account is specially designed for …

Maintaining Statutory Registers Under the Companies Act 2013

CA Jitendra Agarwal
•
Company & LLP

Maintaining Statutory Registers Under the Companies Act 2013 Share Maintaining statutory registers under the Companies Act, 2013 is an important legal requirement …

Who is an Auditor?

An auditor is a qualified professional who checks the financial statements of a company. Their job is to ensure that the company’s accounts are accurate, legal, and fair. Auditors give an independent opinion, which helps build trust among shareholders, investors, and the government.
In a private limited company or anywhere in India, appointing an auditor is not optional — it is mandatory under the Companies Act, 2013.

When Must an Auditor Be Appointed?

When a company is newly incorporated, it must appoint its first auditor within 30 days from the date of registration. This appointment must be made by the Board of Directors. If they fail to do so, the shareholders must appoint the auditor within the next 90 days.
The first auditor will hold office until the first Annual General Meeting (AGM). After that, an auditor is usually appointed for five years at a time, but their appointment needs to be approved by the members at every AGM.

Confused about how to register a business?

Get your Business registration today!

Start your company legally with expert help and hassle-free process.

Click Here

Who Can Be Appointed as an Auditor?

Who Can Only a Chartered Accountant (CA) who holds a valid Certificate of Practice can be appointed as an auditor.
In the case of a firm where most partners are CAs, the firm can be appointed as an auditor too.
Companies cannot appoint:

A person who is a partner or employee of the company
Someone is in debt (owes money) to the company
Relatives of directors or key employees
This rule ensures that auditors stay neutral and independent.

Process for Appointment of Auditor

Here is the process:

Board Meeting:
In the first Board Meeting after incorporation, the Directors should pass a resolution to appoint an auditor.
Filing Form ADT-1:
The company must file Form ADT-1 with the Registrar of Companies (ROC) within 15 days of appointment.
Annual Appointment:
After the first appointment, the company should get shareholders’ approval for the appointment of the auditor in every AGM.
Tenure of Five Years:
Once appointed, the auditor will hold office for five years, subject to ratification at every AGM.
For companies that are serious about private limited company compliance, following this process carefully is very important.

Book Your Appointment Today!

Removal and Resignation of Auditor

Removal:
A company can remove an auditor before their term ends by getting approval from the Central Government and passing a special resolution.
Resignation:
If the auditor resigns, they must file Form ADT-3 with the ROC, explaining the reasons for their resignation.
Handling the appointment, removal, or resignation properly is a must to stay compliant with the Companies Act.

Importance of Appointing an Auditor

Appointing an auditor helps your company:

Stay legally compliant
Build trust with investors and stakeholders
Detect fraud and errors early
Improve financial transparency
Even if you have just completed your business registration, appointing an auditor on time should be one of your priorities.

Special Points to Remember

Companies like One Person Company (OPC) and small companies also need to appoint auditors.
Listed companies must rotate auditors every five or ten years.
Companies need to disclose the auditor’s appointment in their financial statements.
Companies offering virtual CFO services for MSME often guide small businesses in completing such legal formalities easily.
If you hire a personal CFO, they can manage tasks like appointing auditors, maintaining financial records, and ensuring smooth compliance without any stress on you.

Penalty for Non-Compliance

If a company fails to appoint an auditor or file the necessary forms, heavy penalties can be imposed:

Companies may have to pay fines ranging from ₹25,000 to ₹5,00,000.
Officers in default may also be fined.
Thus, completing your private limited company compliance properly is not just good practice — it’s a legal necessity.

Conclusion

The appointment of an auditor under the Companies Act, 2013, is a very crucial task for all types of companies. Whether you are running a large business or a small startup, you must appoint a qualified auditor on time and follow the complete procedure. This ensures your company’s financial health, builds trust, and avoids unnecessary penalties. Always take expert help if you are unsure, especially after your business registration.

Why Choose E Accountax Manager?

At E Accountax Manager, we make your compliance journey simple and smooth. From helping you appoint the right auditor to filing mandatory forms on time, our experts handle everything with care. We also offer Virtual CFO services for MSMEs to support growing businesses at every step. Trust us for timely services, genuine advice, and affordable solutions.

Follow us on:

Facebook

Youtube

Whatsapp

Instagram

X-twitter

Pinterest

Linkedin

Consult Today!

*Wait after entering details; you’ll be redirected to book an appointment.

Latest News

News Updates

Learn more…

Form 10BD and 10BE Explained: Step-by-Step Filing Guide for NGOs

CA Jitendra Agarwal
•
NGO

Form 10BD and 10BE Explained: Step-by-Step Filing Guide for NGOs Share To ensure transparency and accuracy in reporting donations, the Government of …

GST on Exports in India – A Complete Guide for Exporters