A Comprehensive Insight into Companies Act, 2013 Provisions
Introduction: The Companies Act, 2013 prescribes a meticulous framework for the appointment of auditors, particularly in Section 139, complemented by the Companies (Audit & Auditors) Rules, 2014. A profound comprehension of these provisions is imperative for companies, ensuring a compliant and streamlined process for auditor appointments. This article meticulously explores the intricacies of auditor appointments, encompassing tenure, eligibility criteria, procedural nuances, and more.
Appointment of Auditor under Section 139 of Companies Act, 2013:
Section 139(1): Mandates that every company, during its first Annual General Meeting (AGM), appoints an individual or a firm as an auditor. The appointed auditor holds office from the conclusion of that meeting until the conclusion of the sixth AGM, and subsequently, for every sixth AGM.
Companies (Audit & Auditors) Rules, 2014 – Rule 4: Requires obtaining written consent and a certificate from the auditor before appointment. The certificate asserts the auditor’s eligibility, adherence to appointment terms, compliance with statutory limits, and discloses any pending proceedings against the auditor or audit firm.
Section 139(2) and Rule 5: Imposes restrictions on certain classes of companies from appointing or reappointing auditors for specific durations. Notably, an individual auditor or audit firm completing the stipulated terms is ineligible for reappointment in the same company for five years.
Section 139(3): Mandates the conduct of audits by more than one auditor.
Section 139(5): Empowers the Comptroller and Auditor-General (C&AG) of India to appoint auditors for government companies within 180 days from the start of the financial year.
Section 139(6): Specifies the process for appointing the first auditor for companies other than government companies, ensuring a timely appointment by the Board of Directors (BOD) or members.
Casual Vacancy in Auditor’s Office: Defines procedures for filling auditor vacancies, involving the BOD or C&AG, based on the type of company. A retiring auditor may be reappointed if certain conditions are met.
Rule 3 of Companies (Audit & Auditors) Rules, 2014: Outlines the manner and procedure for selecting and appointing auditors, emphasizing consideration of qualifications and experience relative to the company’s size and needs.
Conclusion: The auditor appointment process, governed by the Companies Act, 2013, prioritizes transparency and regulatory adherence. Companies can ensure compliance and financial integrity by following the procedures outlined in Section 139 and associated rules. Staying abreast of these guidelines is paramount for seamlessly navigating the auditor appointment process.