Appointment of Statutory Auditor

Every Company incorporated under Companies Act, 2013 or any erstwhile Act is required to audit its account on an annual basis, adopt the same at the Annual General Meeting of the Company and file such audited financial statements with the Registrar.

Auditors are entrusted with huge responsibility to present true and fair results, as the financial statement depicts the actual position of the Company therefore auditor plays vital role in the Company.

Chapter X “Audit and Auditors” of Companies Act, 2013 has explained the process for appointment, resignation, removal, duties, eligibility and other provisional aspects.

In this article we will go through the provisions for appointment of auditors as per Companies Act, 2013 (“Act”).

Appointment of Auditor (Section 139(1) of the Act)

Term of Auditor (Section 139(2) of the Act)

An individual auditor who has completed his term of 5 years shall not be eligible for re-appointment as auditor in the same company for five years from the completion of his term.

An audit firm which has completed its 2 term of 5 years shall not be eligible for re-appointment as auditor in the same company for five years from the completion of such term.

As per explanation of section 139 (4) of the Act, the word “firm” shall include a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008.

Perquisites (Section 139(1) of the Act)

  • Written consent of Auditor
  • Auditor shall submit certificate stating that:
    • Individual/firm is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949
    • the proposed appointment is as per the term provided under the Act;
    • the proposed appointment is within the limits laid down by or under the authority of the Act;
    • the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
  • Certificate shall also indicate whether the auditor satisfies the criteria provided in section 141 of the Act:

Rotation of Auditor (Section 139(3) of the Act)

Members of the Company may decide to rotate the partner at the general meeting that:

  • the auditing partner and his team shall be rotated at such intervals as may be resolved by members.
  • the audit shall be conducted by more than one auditor.

Qualifications and Disqualifications of Auditors              

Section 141 of Companies Act, 2013 and rule 10 of the Companies (Audit and Auditor) Rules, 2014 states the Eligibility, Qualifications and Disqualifications of Auditors.

Qualification(Section 141 of the Act)


The following persons shall not be eligible for appointment as an auditor of a company, namely:—


Section 139(9) of the Act states that a retiring auditor may be re-appointed at an annual general meeting, if-

  • he is not disqualified for re-appointment;
  • he has not given the company a notice in writing of his unwillingness to be re-appointed; and
  • a special resolution has not been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.

As per section 139(10) of the Act, if at any annual general meeting, no auditor is appointed or re-appointed, the existing auditor shall continue to be the auditor of the company.

Role of Audit Committee in appointment of Auditor

As per section 139(10) of the Act, if Company is required to constitute audit committee the appointment/re appointment of auditor is to be done on recommendation of audit committee.

As per section 177 of the Act, Every audit committee shall:

  • recommend for appointment, remuneration and terms of appointment of auditors of the company
  • review and monitor the auditor’s independence and performance, and effectiveness of audit process
  • examination of the financial statement and the auditors’ report thereon


As per section 139 of the Act, appointment of auditor shall be intimated to the Registrar within fifteen days of the meeting in which the auditor is appointed in E Form ADT-1.

Companies are required to adhere to the above said provision while appointing auditor of the Company. Further these processes will amend accordingly for listed companies and companies registered under any other regulatory bodies like IRDA, RBI.

It is also pertinent to note that these provision are only for non-government companies , for government companies any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments,  appointment of auditor is done by Comptroller and Auditor-General of India after following another set of provisions.

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