Pre-requisite & Important Points 

• A written consent has to be obtained from the auditor for his appointment and a certificate shall be submitted by him in accordance with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 stating that:

• • the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made thereunder
  • the proposed appointment is as per the term provided under the Act
  • the proposed appointment is within the limits laid down by or under the authority of the Act
  • the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.

• The auditor has to mention in the Certificate as above that it fulfills all the required eligibility criteria for appointment as per Section 141 of the Companies Act, 2013 and he shall also not be disqualified as per Rule 10 of the Companies (Audit and Auditors) Rules, 2014.  

• In case of a company that is required to constitute an Audit Committee* under section 177, the committee, and, in cases where such a committee is not required to be constituted, the Board, shall take into consideration the qualifications and experience of the individual or the firm proposed to be considered for appointment as auditor and whether such qualifications and experience are commensurate with the size and requirements of the company. While considering the appointment, the Audit Committee or the Board, as the case may be, shall have regard to any order or pending proceeding relating to professional matters of conduct against the proposed auditor before the Institute of Chartered Accountants of India or any competent authority or any Court.

*Every Listed Public Company and following classes of companies shall constitute an Audit Committee:

– the Public Companies having paid up share capital of ten crore rupees or more; or

– the Public Companies having turnover of one hundred crore rupees or more; or

– the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees

Exception: unlisted public joint venture, unlisted public wholly owned subsidiary, unlisted public dormant company

• Where a company is required to constitute the Audit Committee, the committee shall recommend the name of an individual or a firm as auditor to the Board for consideration and in other cases, the Board shall consider and recommend an individual or a firm as auditor to the members in the general meeting for appointment.

• The first auditor shall hold the office till the conclusion of the first annual general meeting. 
• The Board may fix the remuneration of first auditor appointed by it. In other cases, the remuneration of the auditor shall be fixed in its general meeting or in such manner as may be determined therein. Where applicable, the Audit Committee shall recommend the remuneration. The remuneration shall, in addition to the fee payable to an auditor, include the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility extended to him but does not include any remuneration paid to him for any other service rendered by him at the request of the company. [Section 142 of Companies Act 2013]

*The rotation of the auditor shall be as per the provisions Section 139 of the Companies Act, 2013 read with corresponding Rules.