Section 139 of the Companies Act, 2013 contains
provisions regarding Appointment of Auditors. Discussion
on appointment of auditors may be grouped under two
broad headings-
I Appointment of First Auditors.
II Appointment of Subsequent Auditors.Appointment of First Auditor

Appointment of First Auditors in the case of a company, other than a Government
Company: As per Section 139(6), the first auditor of a company, other than a Government
company, shall be appointed by the Board of Directors within 30 days from the date of
registration of the company.
In the case of failure of the Board to appoint the auditor, it shall inform the members of the
company.
The members of the company shall within 90 days at an extraordinary general meeting appoint
the auditor. Appointed auditor shall hold office till the conclusion of the first annual general
meeting.Appointment of First Auditors in the case of Government Company: A “Government
company” is a company in which not less than 51% of the paid-up share capital is held 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, and includes a company which is a
subsidiary company of such a Government company.
Section 139(7) provides that in the case of a Government company or 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, the first auditor shall be appointed by the Comptroller and Auditor-General
of India within 60 days from the date of registration of the company.
In case the Comptroller and Auditor-General of India does not appoint such auditor within the
above said period, the Board of Directors of the company shall appoint such auditor within the
next 30 days. Further, in the case of failure of the Board to appoint such auditor within next 30
days, it shall inform the members of the company who shall appoint such auditor within 60 days
at an extraordinary general meeting. Auditors shall hold office till the conclusion of the first
annual general meeting.Appointment of Subsequent Auditor/Reappointment of Auditor

Appointment of Subsequent Auditors in case of Non Government Companies:
Section 139(1) of the Companies Act, 2013 provides that every company shall, at the first
annual general meeting appoint an individual or a firm as an auditor who shall hold office fromthe conclusion of that meeting till the conclusion of its sixth annual general meeting and
thereafter till the conclusion of every sixth meeting.
The following points need to be noted in this regard-
(i) Before such appointment is made, the written consent of the auditor to such appointment,
and a certificate from him or it that the appointment, if made, shall be in accordance with
the conditions as may be prescribed, shall be obtained from the auditor.
(ii) The certificate shall also indicate whether the auditor satisfies the criteria provided in
section 141.
(iii) The company shall inform the auditor concerned of his or its appointment, and also file a
notice of such appointment with the Registrar within 15 days of the meeting in which the
auditor is appointed.
Appointment of Subsequent Auditors in case of Government Companies: As per
section 139(5), in the case of a Government company or 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, the Comptroller and Auditor-General of India shall, in respect of a financial year,
appoint an auditor duly qualified to be appointed as an auditor of companies under this Act,
within a period of 180 days from the commencement of the financial year, who shall hold office
till the conclusion of the annual general meeting.

Filling of a Casual Vacancy
As per Section 139(8), any casual vacancy in the office of an auditor shall-
(i) In the case of a company other than a company whose accounts are subject to audit
by an auditor appointed by the Comptroller and Auditor-General of India, be filled by
the Board of Directors within 30 days.
If such casual vacancy is as a result of the resignation of an auditor, such appointment
shall also be approved by the company at a general meeting convened within three months
of the recommendation of the Board and he shall hold the office till the conclusion of the
next annual general meeting.
(ii) In the case of a company whose accounts are subject to audit by an auditor
appointed by the Comptroller and Auditor-General of India, be filled by the Comptroller
and Auditor-General of India within 30 days.
It may be noted that in case the Comptroller and Auditor-General of India does not fill the vacancy
within the said period the Board of Directors shall fill the vacancy within next 30 days.Casual Vacancy by Resignation: As per section 140(2) the auditor who has
resigned from the company shall file within a period of 30 days from the date of resignation, a
statement in the prescribed Form ADT–3 (as per Rule 8 of CAAR) with the company and the
Registrar, and in case of the companies referred to in section 139(5) i.e. Government company,
the auditor shall also file such statement with the Comptroller and Auditor-General of India,
indicating the reasons and other facts as may be relevant with regard to his resignation. In case
of failure the auditor shall be punishable with fine which shall not be less than fifty thousand
rupees or the remuneration of the auditor, whichever is less but which may extend to five lakh rupees as per section 140(3).

Other Important Provisions Regarding Appointment of Auditors
(1) A retiring auditor may be re-appointed at an annual general meeting, if-
(a) he is not disqualified for re-appointment;
(b) he has not given the company a notice in writing of his unwillingness to be re-
appointed; and
(c) a special resolution has not been passed at that meeting appointing some other
auditor or providing expressly that he shall not be re-appointed.
(2) Where at any annual general meeting, no auditor is appointed or re-appointed, the existing
auditor shall continue to be the auditor of the company




Removal of Auditor Before Expiry of Term: According
to Section 140(1), the auditor appointed under section 139 may
be removed from his office before the expiry of his term only by
a special resolution of the company, after obtaining the previous
approval of the Central Government in that behalf as per Rule 7
of CAAR, 2014-
Fig: Auditor leaving office of the auditor5
(1) The application to the Central Government for removal of auditor shall be made in Form
ADT-2 and shall be accompanied with fees as provided for this purpose under the Companies
(Registration Offices and Fees) Rules, 2014.
(2) The application shall be made to the Central Government within 30 days of the resolution
passed by the Board.
(3) The company shall hold the general meeting within 60 days of receipt of approval of the
Central Government for passing the special resolution.
It is important to note that before taking any action for removal before expiry of terms, the auditor
concerned shall be given a reasonable opportunity of being heard.It is hereby clarified that in the case of a firm, the liability shall be of the firm and that of every
partner or partners who acted in a fraudulent manner or abetted or colluded in any fraud by, or
in relation to, the company or its director or officers.
6.2 Appointment of Auditor Other Than Retiring Auditor: Section 140(4) lays down
procedure to appoint an auditor other than retiring auditor who was removed-
(1) Special notice shall be required for a resolution at an annual general meeting appointing as
auditor a person other than a retiring auditor, or providing expressly that a retiring auditor
shall not be re-appointed, except where the retiring auditor has completed a consecutive
tenure of five years or as the case may be, ten years, as provided under sub-section (2)
of section 139.
(2) On receipt of notice of such a resolution, the company shall forthwith send a copy thereof
to the retiring auditor.
(3) Where notice is given of such a resolution and the retiring auditor makes with respect
thereto representation in writing to the company (not exceeding a reasonable length) and
requests its notification to members of the company, the company shall, unless the
representation is received by it too late for it to do so,-
(a) in any notice of the resolution given to members of the company, state the fact of the
representation having been made; and
(b) send a copy of the representation to every member of the company to whom notice
of the meeting is sent, whether before or after the receipt of the representation by the
company. and if a copy of the representation is not sent as aforesaid because it was
received too late or because of the company's default, the auditor may (without
prejudice to his right to be heard orally) require that the representation shall be read
out at the meeting.
Students may note that if a copy of representation is not sent as aforesaid, a copy thereof shall
be field with the Registrar.
Curtailing right of the auditor regarding circulation of copy of representation in the case
of appointment of auditor other than retiring auditor under section 140(4) of the
companies act, 2013:
If the Tribunal is satisfied on an application either of the company or of any other aggrieved person
that the rights conferred by section 140(4) of the Companies Act, 2013 are being abused by the
auditor, then, the copy of the representation may not be sent and the representation need not be
read out at the meeting.