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As per chapter X of the Companies Act, 2013, which is dealing in Audit and Auditors, An auditor can be an individual who shall be a qualified Chartered Accountant as per CA Act, 1949 or a firm having its majority members as a qualified Chartered Accountant. An auditor is an individual who is trained to review and verify that the accounting data provided by a person, whether natural or artificial, voluntarily or mandatorily as prescribed by the laws, accurately corresponds to the activities that have been partaken by the person.

Section 141(3) read with Rule 10 of Company Audit & Auditors Rules, 2014, following persons shall not be qualified as an Auditor,

1. A Body Corporate other than LLP (Limited Liability Partnership) registered under LLP Act, 2008;
2. An officer or employee of the company;
3. A person who is a partner or who is in employment, of an officer or employee of the company;
4. A person, who or his relative or partner :
   1. Holding a subsidiary or part of a subsidiary
   2. Is indebted to company or subsidiary for amount more than 5 Lakhs





5. Has given any guarantee with respect to the indebtedness of any third person for an amount exceeding 1 Lakhs.

6. A person having any business relationship with the company, its associate or subsidiary

Besides the Qualifications and Disqualifications as specified above, The Institute of Chartered Accountants of India has also declared certain services which cannot be rendered by an auditor. This is clearly described under Section 144 of the Companies Act, 2013, as follows:

1. Accounting and bookkeeping services;
2. Internal audit;
3. Design and implementation of any financial information system;
4. Actuarial services;
5. Investment advisory services;
6. Investment banking services;
7. Rendering of outsourced financial services;
8. Management services; and
9. any other kind of services as may be prescribed:

When a newly commenced company (whether Government or Non-Government) is incorporated, it has to appoint an auditor which shall be termed as its First Auditor.

In case of Non-Government Company, as stated in Sec 139(6), the Board of Directors of the company shall appoint its first auditor within 30 days of its date of registration. If the Board fails to appoint the first auditor within the prescribed time, the members of the company shall appoint the first auditor within 90 days. An Extraordinary General Meeting (EGM) is called upon by the members for the appointment of the first auditor.




The first auditor is appointed till the first Annual General Meeting (AGM) and then subsequent auditor is appointed in the first AGM for 5 years tenure. As per section 142(1), remuneration of the first auditor can be decided by the Board of Directors.


In case of Government Company, as specified under Section 139(7), the first auditor shall be appointed within 60 days by the Comptroller and Auditor General of India (C&AG), from the date of registration of the company. In case of failure, then the Board of Directors shall appoint within next 30 days after the expiry of 60 days. Furthermore, if Board of Directors are also unable to make the appointment, then the members of the company shall appoint the first auditor within next 60 days through an Extraordinary General Meeting (EGM). The first auditor shall hold his office till the end of the first AGM.

Earlier under Companies Act, 1956, the first auditor was required to File Form 23B with a prescribed fee of INR 300 with ROC. Now, form ADT-1 is required to be filed to intimate ROC about the appointment of the Auditor.

A company has to file Form ADT-1 within 15 days from the date of appointment of the auditor.

In case of appointment of first auditor, it is not mandatory to file ADT-1 form with ROC since the Companies Act, 2013 is silent on this. However, as a good corporate governance practice, it is advisable to file the form in order to intimate the ROC about the appointment of first auditor.





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