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Appointment of First Auditor of Company: Process, Fees & Documents of ADT-1 Filing

Appointment of First Auditor of Company: Process, Fees & Documents of ADT-1 Filing

Setindiabiz TeamSeptember 21, 2024
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Read our comprehensive guide on the Appointment of First Auditor of Company, delving into the details of its legal framework, ROC filing in ADT-1, and due date. Get Expert tips to avoid penalties and ensure a smooth compliance journey!
The appointment of first auditor of company is a pivotal step dictated by the Companies Act of 2013. Within the initial thirty days post-incorporation, a company must appoint its first auditor via a board resolution to ensure financial transparency and adherence to regulatory standards. Navigating through this process requires a clear understanding of eligibility requirements, due dates, ROC filing procedures, and more. So, let’s dive into each of these details to ensure the same. Whether you’re a new entrepreneur or a working professional, a thorough knowledge will effectively guide you through all adverse consequences possible.

Purpose of Appointment of First Auditor of a Company

Appointment of First Auditor First Auditor of a company plays a crucial role in ensuring financial accountability and transparency. This designated authority, often a practicing Chartered Accountant in India or a CA firm, is appointed within the initial thirty days of the company’s incorporation through a board resolution. The First Auditor’s responsibilities encompass meticulous auditing of the company’s financial statements, ensuring compliance with accounting standards and providing a robust foundation for the company’s financial management. He establishes a framework of trust and accuracy in financial reporting, which is much needed for compliance as well as transparency with stakeholders. Here’s a detailed list of his roles and responsibilities:
  • Audit Financial Statements: Conduct a thorough examination of the company’s financial statements to ensure accuracy, completeness, and compliance with accounting standards.
  • Compliance Assurance: Verify that the company adheres to legal and regulatory requirements, including those outlined in the Companies Act, 2013, within the framework of the “Appointment of First Auditor of Company.”
  • Risk Assessment: Identify and assess financial risks, providing insights to stakeholders and management for informed decision-making.
  • Audit Report Preparation: Compile comprehensive audit reports detailing findings, recommendations, and any potential areas of concern, contributing to a transparent financial management system.
  • Advisory Role: Offer professional advice to the company on financial matters, internal controls, and risk management strategies.

Legal Framework of First Auditor Appointment

The Companies Act of 2013, is the governing legislation for the appointment of first auditor of company in India. As per Section 139(6) of the Act, within thirty days of incorporation, a company must appoint its first auditor through a resolution passed by the Board of Directors in its first board meeting. This auditor will hold office until the conclusion of the first annual general meeting (AGM) of the company. Beyond a mere legal requirement, the appointment of auditor of company marks the initiation of corporate financial governance, and contributes in shaping the trajectory of a company’s fiscal responsibility.

Eligibility Requirements for First Auditor Appointment

The Companies Act outlines stringent eligibility criteria Appointment of First Auditor of Company. The individual selected for this pivotal role must, first and foremost, hold the esteemed designation of a practicing Chartered Accountant in India, including a valid membership of the ICAI. Additionally, a prerequisite for the appointed auditor is the possession of a valid Certificate of Practice, a credential that affirms their authorization to practice as a Chartered Accountant. Also, a company can hire a CA Firm as the first auditor provided a majority of its members are practicing Chartered Accountants. Beyond formal qualifications, the selected auditor is mandated to bring substantial experience and demonstrated expertise in auditing financial statements to the table.
Note:
Please note that a CA is not eligible for being appointed as first auditor of company if he is also providing his services for the purpose of accounting, consulting or GST Return filing. In other words, for appointment of first auditor of company, the CA must be an independent person and not involved in day to day accounting, tax or any other manner.

Stepwise Process of First Auditor Appointment

Appointment of First Auditor of Company involves a methodical process with a series of steps to be followed. It begins by shortlisting qualified auditors, securing their consent, and finalizing the appointment in a Board Meeting. Formal communication follows, and the process concludes with the timely filing of Form ADT-1 with the Registrar of Companies (ROC). The stepwise guide below will help you understand the process better.
Stepwise Process of First Auditor Appointment

Step 1: Shortlisting of Qualified Auditor

Initiate auditor selection process by preparing a comprehensive list of potential candidates, ensuring they are independently practicing Chartered Accountants certified by ICAI and eligible for statutory audit under the Companies Act, 2013. Send formal letters seeking their consent to serve as the statutory auditor for the company.

Step 2: Obtain Consent from the Auditor

Secure the auditor’s consent in a prescribed format, including a specific declaration confirming compliance with eligibility criteria outlined in Section 141 of the Companies Act, 2013, the Chartered Accountant Act, 1949, and related regulations.This step emphasises the importance of ensuring regulatory compliance during the appointment of first auditor of company.

Step 3: Hold Board Meeting to Appoint the Auditor

Convene a Board Meeting to deliberate and formalize the appointment of first auditor of company. Decide on the auditor’s remuneration during this meeting, typically authorizing one director to oversee the necessary formalities associated with the process. Finally, pass a resolution to confirm the appointment officially.

Step 4: Intimate Auditor of His Appointment

Communicate the board’s decision to appoint the auditor formally by sending a letter on the company’s letterhead, signed by the authorized director.This step ensures clarity and officially notifies the selected auditor about their role in the Company.

Step 5: File Form ADT-1 to ROC

Conclude the process by filing Form ADT-1 with the Registrar of Companies (ROC) within 15 days of the auditor’s appointment or 30 days from the registration of the company. This formal submission serves as an intimation to the ROC about the appointment of first auditor and the consequent fulfillment of compliance.

ADT-1 Filing to the ROC

Form ADT-1 holds paramount significance when it comes to the appointment of auditor of a company. This legal document is instrumental in serving as a credible intimation to the ROC, not just about the status of compliance but also about eligibility of the appointed auditor. Beyond a mere procedural requirement, the purpose of Form ADT-1 extends to fostering transparency, accountability, and independence in financial reporting. A few important things you must know about ADT-1 filing have been explained below.

Due Date of ADT-1

The due date for filing Form ADT-1 is crucial to avoid penalties for non-compliance. According to the Companies Act, 2013, the form must be filed within fifteen days of the appointment of the first auditor. Therefore, it is essential to promptly initiate the filing process to meet this deadline. Delayed filing may cause adverse consequences like fines and penalties. To avoid these, make sure you avail our timely assistance and consultation.

Filing Process and Documents

Form ADT-1 filing for the Appointment of First Auditor of Company demands precision. You must commence by obtaining a Digital Signature Certificate (DSC) and downloading the form from the MCA website. Attach essential documents, verify accuracy, and submit the form, accompanied by payment, on the MCA portal. This methodical approach ensures a streamlined process, avoiding delays in compliance. Here are the details you should know.
  1. Obtain a Digital Signature Certificate (DSC): The auditor appointed or any director of the company must have a valid DSC to digitally sign the form.
  2. Fill out Form ADT-1: Download the form from the Ministry of Corporate Affairs (MCA) website and fill in the necessary details accurately.
  3. Attach supporting documents: Prepare the required documents for submission, including board resolution, consent letter from the auditor, and other relevant documents.
  4. Verify the form: Review the filled form and ensure accuracy to avoid any discrepancies or rejection during the filing process.
  5. Submit the form: Upload the filled form and supporting documents on the MCA portal and submit them.
  6. Make the payment: Pay the prescribed filing fees mentioned in the next section.

ADT-1 Fees

Navigating the financial aspects of the appointment of first auditor of company and understanding the prescribed filing fees for Form ADT-1 is crucial. The fees associated with this process are determined by the company’s authorized share capital and play a pivotal role in ensuring compliance with regulatory guidelines. The table below displays the exact amount. However, for real time updates check the MCA website or talk to our expert consultants.
Share Capital Filing Fees
Up to ₹ 1,00,000
₹ 200
₹ 1,00,000 to ₹ 4,99,999
₹ 300
₹ 5,00,000 to ₹ 24,99,999
₹ 400
₹ 25,00,000 and above
₹ 500

Penalty for Non-Filing

While filing ADT-1, an essential aspect to grasp is the penalty framework associated with delayed filing. Timeliness in completing this process is not merely procedural; it is a critical compliance measure. So, let’s explore the consequences of missing the stipulated deadlines, including penalties imposed by regulatory authorities for delays in the filing of ADT-1.
Sl.No Delay in Filing (No of days) Penalty
1.
Up-to 30
2 times of Normal Fees
2.
More than 30 to 60
4 times of Normal Fees
3.
More than 60 to 90
6 times of Normal Fees
4.
More than 90 to 180
10 times of Normal Fees
5.
More than 180
12 times of Normal Fees

Appointment of the first auditor of a company and filing Form ADT-1 are crucial compliances towards ensuring financial transparency and accountability. By understanding the legal framework, eligibility requirements, due dates, filing process, fees, and penalties, you can navigate this process with confidence. Remember to plan ahead, seek professional assistance, and stay updated with the latest regulations to avoid penalties and maintain compliance. Together, let’s build a strong foundation for your company’s financial management.

Conclusion

FAQs

Q1: What if I miss the due date for filing Form ADT-1?

If you miss the due date for filing ADT-1, penalties may be imposed. It is advisable to file the form as soon as possible. ADT-1 form is filed to intimate the ROC about the appointment of the first auditor of the company and its due date is within 30 days from the date of company registration.

Q2: Can I appoint any qualified auditor as the first auditor of my company?

No, the auditor must meet the eligibility requirements defined by the ICAI and possess the necessary qualifications and experience in auditing financial statements. Also, appointment of first auditor of a company is not possible without consent from the designated person or firm.

Q3: Is it mandatory to obtain a Digital Signature Certificate for filing Form ADT-1?

Yes, a valid Digital Signature Certificate is required to digitally sign the form. It ensures the authenticity and integrity of the filing process.

Q4: Can I file Form ADT-1 for appointment of the first auditor of a company offline?

No, Form ADT-1 must be filed online through the MCA portal. Offline filing is not permissible.

Q5: What should I do if there are changes in the first auditor before the first AGM?

In case of any changes in the first auditor, such as resignation or removal, you need to follow the prescribed procedures as per the Companies Act, 2013, and notify the Registrar of Companies (RoC) accordingly.
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2 thoughts on "Appointment of First Auditor of Company: Process, Fees & Documents of ADT-1 Filing"

  1. Your infographic in this blog about on Process of auditor of company is fantastic. Great?

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    1. Very informative. Before Reading this I had searching many websites or blogs but here I got the solution of my problem. Thank you.

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