Appointment of First Auditor in Case of Companies

Every company incorporated under the Companies Act, 2013 is required to have its financial statements audited by a qualified Chartered Accountant (or a firm of Chartered Accountants) from its very first financial year. The appointment of the first statutory auditor is governed by Section 139(6) (for non-government companies) and Section 139(7) (for government companies) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014.

1. First Auditor in a Non-Government Company (Section 139(6))

• Who appoints: The Board of Directors of the company.
• Timeline for Board appointment: Within 30 days from the date of registration (incorporation) of the company.
• If the Board fails to appoint: The Board must inform the members of the company, who shall appoint the first auditor within 90 days at an Extraordinary General Meeting (EGM).
• Tenure of office: The first auditor holds office until the conclusion of the first Annual General Meeting (AGM).

2. First Auditor in a Government Company (Section 139(7))

In the case of a Government company—or any other company owned or controlled, directly or indirectly, by the Central Government, State Government(s), or partly by both—the appointment follows a three-tier timeline:

• Who appoints first: The Comptroller and Auditor-General of India (C&AG).
• Timeline for C&AG: Within 60 days from the date of registration of the company.
• If C&AG does not appoint within 60 days: The Board of Directors of the company shall appoint the first auditor within the next 30 days.
• If the Board also fails: The Board shall inform the members, who shall appoint the auditor within the next 60 days at an Extraordinary General Meeting (EGM).
• Tenure of office: Until the conclusion of the first Annual General Meeting (AGM).

3. Step-by-Step Procedure for Appointing the First Auditor

1. Obtain Auditor’s Written Consent & Eligibility Certificate: Before passing the resolution, obtain a written consent letter and a certificate from the proposed Chartered Accountant / CA firm confirming that they are eligible for appointment and not disqualified under Section 141 of the Companies Act, 2013, and that the appointment is within the limits specified under Section 141(3)(g).
2. Convene the First Board Meeting (Within 30 Days of Incorporation): Issue a formal notice and agenda to all directors, hold the Board Meeting, and pass a Board Resolution appointing the first statutory auditor and fixing their remuneration.
3. Issue Appointment Letter to the Auditor: Send a formal letter of appointment along with a certified true copy of the Board Resolution to the auditor.
4. File Form ADT-1 with the Registrar of Companies (ROC): File web-form ADT-1 on the MCA V3 portal within 15 days of the meeting in which the auditor is appointed, attaching the Board Resolution, written consent, and Section 141 eligibility certificate.

4. Important Amendment — Mandatory Form ADT-1 for First Auditors

Historically, the proviso to Section 139(1) and Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014 exempted companies from filing Form ADT-1 for the first auditor appointed by the Board, though many companies filed it voluntarily as good secretarial practice.

However, the Ministry of Corporate Affairs (MCA), vide notification G.S.R. 359(E) dated 30 May 2025 (the Companies (Audit and Auditors) Amendment Rules, 2025, which came into force on 14 July 2025), revised Form ADT-1 and the filing rules on the MCA V3 portal. Following this amendment, filing Form ADT-1 is mandatory for all statutory auditor appointments, including the first auditor appointed by the Board of Directors.