Appointment of auditors is a very important task in any company, irrespective of its small scale or big scale, and also irrespective of its basic structure or of a complex structure. Auditors play a very pivotal role in a company to ensure that the company is financially clear and transparent and genuine. They will give an objective review of financial statements and also claim about the law compliance. The Companies Act 2013 has made it compulsory to have a qualified auditor that ensures all financial practices of a company are complying with industrial standards.
At Bizpole, we understand the nuances in choosing the right auditor for your firm. We are here to provide professional guidance on statutory compliance, company registrations, and hassle-free and problem-free implementation of statutory procedures. We specialize in services like Company Annual Filing, TDS/TCS Return, Copyright Registration, Proprietorship Firm registration, TAN/PAN Application, and many more, that make us the ideal corporate compliance provider for you.
Why is Auditor Appointment Important?
1. It ensures Financial Transparency
An auditor examines the company’s statement of its financial transactions to ascertain that each transaction is indeed fairly recorded, hence reported. Such an openness makes stakeholders, whether shareholders, creditors, or investors, have more confidence and trust.
2. Legal Requirements Compliance
Appointment of an auditor is required under the Companies Act, 2013 within 30 days after the date of incorporation. Non-compliance in this regard may attract penalties and even a disqualification of directors. Other than this legal requirement, the auditors ensure that the entities have statutory compliances in the form of tax filings, GST returns, and other statutory financial obligations.
3. Fraud and Mismanagement Prevention
Auditors act as an internal check that prevents fraudulent activities within the organization. It verifies financial reports and gives warnings when the statements indicate inconsistency, irregularity, or possible red flags. This attention reduces the probability of financial impropriety.
4. Effective Decision Making
By using correct financial information, auditors provide useful insights that can be used in strategic decision-making. Whether it is measuring profit and cash flow or investment opportunities, their analysis helps management decide based on such goals.
Steps to Appoint an Auditor
Appointment of an auditor is made following certain procedures and legal tenets. In a step-by-step procedure on how companies can do this, check here:
1. Board Meeting Resolution
The board meeting resolution for appointing the company’s first auditor must be done. It should be within thirty days from the date of incorporation of the company. The resolution has to be quite explicit and, inter alia, mention the name, term of office of the auditor, and remuneration payable to him.
2. Consent and Eligibility Check
The proposed auditor needs to give written consent and a certificate specifying that he is eligible under Section 139 of the Companies Act, 2013. He also has to indicate that he is not disqualified under any provisions cited in the act.
3. Filing Form ADT-1
Post the allotment is approved in the board meeting then the company has to file Form ADT-1 with the ROC within 15 days. This includes details of the auditor, tenure and a copy of the board resolution. The companies that fail to submit Form ADT-1 are levied penalties.
4. Shareholder’s Approval In AGM
Thereafter, for all appointments made during further financial years, this would be left to the discretion of the shareholder’s approval which has to be sanctioned at the Annual General Meeting of the company. The auditing appointee may be allowed for five consecutive years. However, reappointment will be subject to the decision of the shareholders’ approval thereafter after every term.
3. Appointment of Associate Auditor (if any)
If the incumbent auditor resigns or is removed before completion of his period or terms while still in office, the company has to appoint a new auditor within a period of 30 days. The appointment may be made either by passing a board resolution or by passing a special resolution by shareholders depending on circumstances.
Tips for Choosing the Ideal First Auditor
Eligibility and Qualification
Investigate if the auditor is eligible under the Companies Act, 2013.
Experience
Hire an auditor who has experience conducting audits for newly incorporated companies.
Independence
The auditor should be free of any kind of conflict of interest from the company.
Conclusion
Audit appointment is more than just a legal compliance issue; it has strategic importance since it goes in correlation with your company’s financial health and standing on compliance.
At Bizpole, we offer you comprehensive help in meeting all your compliance requirements so that the entire procedure of auditor appointment may be as smooth and hassle-free as possible. Our services range from not just appointment of the auditor but also include Company Annual Filing, Copyright Registration, TAN/PAN Application, Transfer of Shares, GST Registration, and much more.
Correct selection of the auditor and statutory compliances such as Proprietorship Firm Registration and Responding to GST notices can avoid your company from legal hassles as well as inconsistency in the figures of finance.
Reach us today so you can engage our experts on legal and compliance issues in your company so that you may focus more on business growth without worries!
