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Unit 11: Appointment, Right, Duties and Liabilities of an Auditor

procedure vis a vis special notice has been laid down in section 190 which mandates that the Notes
special notice be given to the company at least fourteen clear days before the meeting is to
beheld. The day on which the notice is served and the day of the meeting itself are to be excluded
in computing the period of fourteen days. The object of giving a special notice is to invite the
special or pointed attention of the members to the particular resolution. In the absence of such
a special notice being given, the resolution would be rendered illegal and ineffective. And the
appointment of a new auditor without complying with the provisions of Section 225 (that is,
without special notice required for a resolution appointing as an auditor a person other than the
retiring auditor), then the resolution passed for appointing the new auditor would be illegal
and in effective. Where at any such meeting no auditor is appointed or reappointed, the Central
Government may appoint a person to fill the vacancy. Notice of the fact that the powers of the
Central Government have become exercisable has to be given by the company to the Central
Government within seven days thereof. Any delay in giving such notice does not affect the
jurisdiction or the capacity of the Central Government to appoint the auditor. The auditor so
appointed by the Central Government holds office till the next annual general meeting of the
company. The Central Government is also authorized to fix the remuneration of the auditors so
appointed by it. Also, in cases where the appointment of the auditor is void abinitio, the Central
Government may fill the vacancy. Similarly where the person appointed at the annual general
meeting is unwilling to accept the appointment, the Central Government would be eligible to
appoint the auditor.

11.3 Procedure for Appointment of First Auditor

Appointment of first auditors

As per section 224(5), the first auditor or auditors of a company shall be appointed by the Board of
directors by passing a board resolution within one month of the date of registration of the company;
and the auditor or auditors so appointed shall hold office until the conclusion of the first annual
general meeting. There is no need to file form 23B for the appointment of first auditor.

Notes Appointment of first auditors in general meeting—A company in general meeting
may appoint the first auditor by passing an ordinary resolution if the Board of directors
fails to exercise its power of appointment of first auditors within one month of the date of
incorporation of the company.

Procedure for Appointment of Regular Auditor at the AGM

Section 224 governs the appointment of auditors. The auditors are to be appointed by the
shareholders of the company in an annual general meeting by passing an ordinary resolution.
Kindly note appointment of Statutory under section 224(1) is an ordinary business read with
Section 173 of the Companies Act, 1956.
Section 224(1) state that every company shall, at each annual general meeting, by passing an
ordinary resolution appoint an auditor or auditors to hold office from the conclusion of that
meeting until the conclusion of the next annual general meeting.
1. Consider the appointment of external auditor in the board meeting and pass a board
resolution recommending the candidature of external auditor to the shareholders.
2. Put the agenda for the appointment of external auditor in the AGM notice.
3. On due date pass an ordinary resolution for the appointment of external auditor.

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