The provisions regarding appointment of auditor are contained in Section 224 of the Companies Act.
Auditor's appointment:
1. First auditor
2. Subsequent auditor
3. Appointment by Central Government
4. Appointment against the casual vacancy
5. Appointment by special resolution
6. Appointment of auditor of Government or certain other companies
1. First Auditor:
The appointment of first auditor should be done by the Board of Directors within the one month of the date of registration of the company. The appointed auditor shall hold the office till the conclusion of the first annual general meeting.
But the company in general meeting can remove such an auditor and can appoint another in his place.
2. Subsequent Auditor
This auditor is appointed every year by the shareholders in annual general meeting by passing an ordinary resolution.
If the auditor so appointed doesn't accept the appointment, the vacancy can neither be treated as casual nor a vacancy by resignation.
3. Appointment by Central Government
If no auditor is appointed at an annual general meeting then the Central Government may appoint the auditor to fill the vacancy.
4. Appointment against a casual vacancy
If the casual vacancy of auditor arises due to death, insanity or insolvency etc. the Board of Directors can fill the vacancy under the Section 224 (6).
5. Appointment by special resolution
In Companies Act, 1974 Section 224A,provides that if 25% or more of the subscribed capital is held whether individually or collectively by:
1) A public financial institution or government company or any other state government
2) Any financial institution in which state government holds not less than 51% of the subscribed capital
3) A nationalised bank or any insurance company carrying on general insurance business
The appointment of auditor shall be made by special resolution.
6. Appointment of auditor of Government or certain other companies
Section 619 provides that auditor of Government company shall be appointed by the Central Government.
