1. AUDIT & AUDITORS (Section 139 – 148)
CHAPTER - X
AUDIT & AUDITORS
(Section 139 – 148)

2. Applicability :
The Auditor should be appointed for the period of 5 Years at a time and will be eligible for reappointment and condition of rotation of auditor is not applicable in the following cases :
a) all private limited companies having paid up share capital of Rs. 20 Crore or Less
AND
b) all unlisted public companies having paid up share capital of Rs. 10 Crore or Less
c) all Unlisted Public Companies & Private Companies having public borrowings from financial institutions, banks or public deposits of Rs. 50 crores or less.

3. APPOINTMENT OF AUDITORS (S.139):
PARTICULARS
UNLISTED PRIVATE &
PUBLIC COMPANIES
FIRST AUDITOR
Appointed by Board of Directors within 30 days from Date of Incorporation Or
By Members at EGM
(within 90 days in case Board fails to appoint)
ii) Hold office till the conclusion of 1st AGM
Auditor at first AGM
BY MEMBERS
(To hold office till conclusion of 6th AGM subject to ratification by members at every AGM)
Subsequent Auditors
(To hold office till conclusion of 6th Meeting, subject to ratification by members at every AGM)
CASUAL VACANCY
1. Due to Resignation
within 3 months of recommendation of Board &
Hold Office till next AGM
2. Due to other reasons
BY BOARD
Within 30 days

4. NON – GOVERNMENT COMPANY LISTED / SUCH OTHER CLASS/ SPECIFIED
APPOINTMENT OF AUDITORS (S.139):
PARTICULARS
NON – GOVERNMENT COMPANY
LISTED / SUCH OTHER CLASS/ SPECIFIED
FIRST AUDITOR
Appointed by Board of Directors within 30 days from Date of Incorporation Or
By Members at EGM
(within 90 days in case Board fails to appoint)
ii) Hold office till the conclusion of 1st AGM
Auditor at first AGM
BY MEMBERS
(for Maximum one term of 5/ 10 consecutive years)
Cooling Period of 5 Years before next Appointment
Subsequent Auditors
BY MEMBERS (for Maximum one term of 5/10 consecutive years)
CASUAL VACANCY
1. Due to Resignation
within 3 months of recommendation of Board &
Hold Office till the next AGM
2. Due to other reasons
BY BOARD
Within 30 days

5. Content of certificate ( BY AUDITOR):
Auditor is eligible for appointment and is not disqualified for appointment under the Act.
Proposed appointment is as per the term provided under the Act
Proposed appointment is within the limits laid down by or under the authority of the Act
list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct
File notice of appointment of auditor with the Registrar of Companies within 15 days in Form ADT-1.

6. Rotation of individual auditor:
Illustration 1:- Number of consecutive years for which an individual auditor has been functioning as auditor in the same company [in the first AGM held after the commencement of provisions of section 139(2)]
Maximum number of consecutive years for which he may be appointed in the same company (including transitional period)
Aggregate period which the auditor would complete in the same company in view of column I and II I II
III
5 years (or more than 5 years)
3 years
8 years or more
4 years
7 years
6 years
2 years
5 years
1 year

7. Rotation of audit firm:
Illustration 2:- Number of consecutive years for which an audit firm has been functioning as auditor in the same company [in the first AGM held after the commencement of provisions of section 139(2)]
Maximum number of consecutive years for which the firm may be appointed in the same company (including transitional period)
Aggregate period which the firm would complete in the same company in view of column I and II I II
III
10 years (or more than 10 years)
3 years
13 years or more
9 years
12 years
8 years
11 years
7 years
10 years
6 years
4 years
5 years
2 years
1 year

8. Removal of the auditor :
Conduct Board Meeting and pass Resolution for Removal
Make application to Central Govt. in Form ADT- 2 + Fees
( Within 30 days From Board Resolution)
After Receipt of Approval From Central Govt. hold General Meeting and pass SPECIAL RESOLUTION
(within 60 Days from Approval)

9. Resignation of Auditor
On resignation, an auditor shall file a statement (indicating reasons & facts) in Form ADT-3 with ROC in 30 days from date of resignation.

10. additional CONTENTS OF AUDITOR’S REPORT
Report on the accounts of any branch office of the company audited is considered.
The observations or comments of the auditors on financial transactions
Any director is disqualified from being appointed as a director under sub- section (2) of section 164;
whether the company has disclosed the impact, if any, of pending litigations on its financial position in its financial statement;
whether the company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts;
whether there has been any delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.

11. AUDITOR NOT TO RENDER CERTAIN SERVICES (S. 144):
Auditor Shall not render following services DIRECTLY or INDIRECTLY to the COMPANY/IT’S HOLDING / IT’S SUBSIDIARY: -
Accounting and book keeping services;
Internal audit;
Design and implementation of any financial information system;
Actuarial services;
Investment advisory services;
Investment banking services;
Rendering of outsourced financial services;
Management services; and
Any other kind of services as may be prescribed: