AUDITORS

Appointment of auditors [S. 139]

Every company at its first AGM,has to appoint an individual or a firm as

an auditor. Such appointee can hold office from the conclusion of the first
AGM till the conclusion of its sixth AGM and afterwards till the conclusion
of every sixth AGM. The manner and procedure of selection of auditors
by the members of the company has to be according to what may be pre
scribed. The company has to place the matter relating to the appointment
for ratification by memberson every annual general meeting.It is necessary
that written consent of the auditor is to be taken before he is appointed as
such. A certificate has also to be taken from him that his appointment is in
accordance with the prescribed rules. The certificate has also to indicate
whether the auditor satisfies the criteria provided in Section141 [qualifica
tions of auditors]. The company has to inform the auditor or the firm of the
fact of appointment. The notice of such appointment has also to be sent to
the Registrar within 15 days of the meeting in the prescribed manner. The
Explanation appended to the section says that "appointment" is to include
also reappointment.

Term of appointment [S. 139(2)]

A listed company or any other class or classesof companiesas maybe prescribed is not to appoint
or reappoint
an individual as an auditor formore than one term of five consecutiveyears
and a firm of auditors for more than two terms of five consecutive years.
An individual auditor who has completedhis one term of five years is not
to be eligible for reappointment in the same company for five years from
the completion of his term. An audit firm which has a common partner or
partners to another audit firm whose tenure has expired is also under the
same disqualification.

REMOVAL AND RESIGNATION OF AUDITOR ( Section 140 )

An auditor appointed under Section 139 may be removed from his office
before the expiry of his term only by a special resolution after obtaining
approval of the Central Government in the prescribed marmer. The auditor
has to be given a reasonable opportunity of being heard.^"® The auditor who
has resigned has to file within 30 days from the date of resignation a state
ment in the prescribed form with the company and Registrar. In the case of
companies coming under Section 139(5), [Govt Cos] the statement has to be
filed with CAG indicating the reasons and other relevant facts with regard
to his resignation. If he fails to comply with this requirement, he becomes
punishable with fine for an amount not less than Rs 50,000 but may extend
to Rs 5,00,000.
A special notice is required for a resolution at an AGM appointing as
auditor a person other than the retiring auditor or providing expressly
that a retiring auditor is not to be reappointed. This is not necessary where
there has been completion of the term of 5 or 10 years, as the case may be.
On receipt of a notice of resolution, the company has to forthwith send a
copy to the retiring auditor.