A company’s statutory auditor is appointed under sections 139 to 141 of the Companies Act, 2013. The members appoint; the Board, in the first year, makes a first appointment within the statutory window. The person appointed must be a Chartered Accountant, or a firm of Chartered Accountants, who is not disqualified, and who is independent of the company.
Independence, stated plainly
The auditor cannot write the books of the same company, cannot be an officer or employee, cannot be indebted to the company beyond the prescribed limit, and cannot hold certain other relationships set out in section 141. A proprietor who wants the same professional to ‘do the Tally and also sign the audit’ is asking for a disqualification. Accounting and audit can both be obtained; they cannot be the same engagement.
The mechanical steps
- Confirm the proposed auditor is eligible and has a valid certificate of practice.
- Obtain written consent and a certificate that the appointment, if made, will be in accordance with the Act.
- Board resolution (first auditor) or members’ resolution (subsequent), within the time the Act allows.
- File ADT-1 with the Registrar within 15 days of appointment.
- Issue an engagement letter. Fees are not published on this website.
Questions that are worth asking
- Will the partner who signs actually see the inventory at GIDA, or only the trial balance in a city office?
- Is there a CARO obligation this year, and has anyone told the auditor about loans, related parties and cash?
- Who will talk to the previous auditor, as professional courtesy and as a source of opening balances?
Related: statutory audit and ROC annual filings.