Appointment of Auditor in a Private Company

1. Introduction

The appointment of an auditor is one of the most crucial compliances for every private company incorporated in India. Auditors serve as independent examiners of the company’s financial statements and ensure that financial reporting is free from misstatements, fraud, or irregularities. The Companies Act mandates that every private company must appoint a statutory auditor within prescribed timelines and maintain proper documentation for audit appointments, resignations, and renewals. A failure to comply may lead to monetary penalties, invalidation of financial statements, and complications during regulatory scrutiny. Understanding the procedural requirements—documentation, board approvals, shareholder resolutions, and ROC filings—is therefore vital for corporate governance.

Every private company must appoint its first auditor within 30 days from the date of incorporation. This appointment is made by the Board of Directors. If the Board fails to make the appointment within the stipulated period, the matter must be referred to shareholders, who will appoint the auditor within 90 days at an Extraordinary General Meeting. Subsequent auditors are appointed for a term of five years, subject to ratification or confirmation by shareholders as per the company's internal governance practice. The auditor must also provide written consent and a certificate confirming eligibility before the appointment becomes legally valid.

Before appointment, the proposed auditor must issue a Consent Letter and a Certificate under Section 141 confirming eligibility. These documents ensure that the auditor meets the qualification criteria, is not disqualified under any provisions of law, and is willing to accept the audit assignment. The certificate must state that the auditor is independent, does not hold securities in the company, does not have a conflict of interest, and has not exceeded the maximum number of audit assignments permitted under law. This pre-appointment verification is a mandatory safeguard to maintain objectivity and integrity.

The documentation for appointing an auditor forms the backbone of statutory compliance. The following key documents must be maintained:

Consent Letter from Auditor: A formal letter specifying acceptance of the appointment and readiness to undertake the audit work for the specified financial year.
Eligibility Certificate (Section 141 Certificate): A declaration by the auditor confirming compliance with qualification norms, independence, and absence of disqualification.
Board Resolution: A resolution passed by the Board approving the appointment of the auditor, applicable for the first auditor or filling a casual vacancy.
Shareholder Resolution (if required): A resolution passed in a General Meeting when the appointment is made by the shareholders, especially for regular five-year appointments.
Company’s Letter of Appointment: A formal communication issued by the company to the auditor confirming appointment details, remuneration, and duties.
Filing of Form ADT-1: A mandatory ROC filing within the prescribed timeline for appointment of auditors, along with all relevant attachments.

These documents together provide a complete compliance trail and support the validity of the auditor’s appointment.

The process begins with identifying a qualified auditor or audit firm and obtaining their consent and eligibility certificates. Once this is received, the Board convenes a meeting to pass a resolution approving the appointment. If shareholder approval is required, a notice is issued for calling an AGM or EGM, followed by passing an ordinary resolution for appointment. After approval, the company issues an appointment letter to the auditor, who acknowledges the engagement. The company must then file Form ADT-1 with the Registrar of Companies within 15 days of the appointment. Maintaining this procedure ensures the legality of the auditor’s appointment and protects the company during compliance audits.

6. Resolution Format for Appointment of First Auditor (Board Resolution)

Below is a full, ready-to-use Board Resolution for appointing the first auditor:

BOARD RESOLUTION FORMAT – APPOINTMENT OF FIRST AUDITOR

“RESOLVED THAT pursuant to Section 139(6) and other applicable provisions of the Companies Act, 2013, M/s ______________________, Chartered Accountants (Firm Registration No. ___________), be and is hereby appointed as the First Auditor of the Company to hold office from the date of incorporation till the conclusion of the first Annual General Meeting, at a remuneration of Rs. ___________ plus applicable taxes and reimbursement of out-of-pocket expenses.”

“RESOLVED FURTHER THAT Mr./Ms. ______________________, Director of the Company, be and is hereby authorized to file Form ADT-1 with the Registrar of Companies and to do all such acts, deeds, and things as may be necessary to give effect to this resolution.”

7. Resolution Format for Appointment of Auditor at AGM (Five-Year Term)

SHAREHOLDERS’ RESOLUTION FORMAT

“RESOLVED THAT pursuant to Section 139 and other applicable provisions of the Companies Act, 2013, M/s ______________________, Chartered Accountants (Firm Registration No. ___________), be and is hereby appointed as the Statutory Auditor of the Company for a period of five years from the conclusion of this Annual General Meeting until the conclusion of the ___________ AGM, at a remuneration of Rs. ___________ per annum plus applicable taxes and reimbursement of out-of-pocket expenses.”

“RESOLVED FURTHER THAT the Board of Directors be and is hereby authorized to fix the remuneration and finalise the terms of engagement with the Statutory Auditor.”

8. Resolution Format for Filling Casual Vacancy Due to Resignation of Auditor

BOARD + SHAREHOLDER RESOLUTION FORMAT

“RESOLVED THAT due to the resignation of M/s ______________________, Chartered Accountants, the Board of Directors hereby appoints M/s ______________________, Chartered Accountants (Firm Registration No. ___________), to fill the casual vacancy in the office of Statutory Auditor, subject to approval by shareholders.”

“RESOLVED FURTHER THAT an Extraordinary General Meeting be convened to obtain members’ approval for the said appointment.”

“RESOLVED FURTHER THAT upon approval by the shareholders, the newly appointed auditor shall hold office until the conclusion of the next Annual General Meeting.”

The appointment of an auditor is a legally mandated and governance-critical function for every private company. Ensuring that the appropriate documentation—consent, eligibility certificates, resolutions, and ROC filings—is completed helps the company maintain statutory compliance and avoid regulatory penalties. With clear procedures and well-structured resolutions, companies can efficiently appoint auditors and strengthen their financial reporting framework. Following the regulations not only protects the company legally but also enhances accountability, transparency, and stakeholder trust.