CAN AUDITOR BE APPOINTED BY A COMPANY PRIOR TO THEIR WRITTEN CONSENT AND ELIGIBILITY CERTIFICATE UNDER SECTION 141 COMPANIES ACT, 2013?
WHAT COMPANIES ACT 2013 SAYS ABOUT THE APPOINTMENT OF AUDITOR .
Section 139(1) of the Companies Act, 2013 and Rule 4(1) of the Companies (Audit and Auditors) Rules, 2014:
“The company shall obtain prior written consent from the auditor proposed to be appointed, and a certificate stating that they are eligible under Section 141, before the appointment is made.”
ARISIFRA SOLUTIONS LTD
ARISIFRA SOLUTIONS LTD has appointed an auditor (Price Waterhouse Chartered Accountants LLP) without first obtaining:
- · The auditor’s written consent, and
- · Eligibility certificate (as per Section 141)
Then ,the appointment is invalid, and it may attract penalties under:
Section 147: Penal provisions for contravention of Sections 139 to 146.
· Company: Fine up to ₹5 lakhs.
· Officer in default: Fine up to ₹1 lakh.
· Auditor (if knowingly consents): May be disqualified and penalized.
REMEDIAL ACTION
- If the mistake has already occurred:
- · Immediately obtain the auditor’s consent and eligibility certificate.
- · Convene a Board Meeting again and ratify or re-appoint the auditor with proper documentation.
- · File Form ADT-1 (if applicable), only after valid appointment.
· If already filed, consider compounding or rectification by reporting to ROC with a compounding application under Section 441.
The interim order dated july 25, 2024 provided that the contravention can be compounded on a payment of a compounding fee of ₹ 75,000 by the company and ₹ 25,000 each by the two of their promoters/ Directors :
FINAL THOUGHT
No auditor appointment is valid unless the company has received their written consent and eligibility certificate prior to the appointment.
R V SECKAR FCS,LLB 79047 19295
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