Corporate Accounting and Auditing · Statutory Audit under the Companies Act, 2013

Appointment of Auditors under Companies Act 2013

Updated 10 October 2026 · Fact-checked

Under the Companies Act, 2013, Section 139 says who appoints an auditor and for how long, and Section 141 says who is eligible. The Board appoints the first auditor; members appoint later auditors at the AGM for a term of five years. Listed companies and prescribed classes of companies must rotate auditors. Learn the time limits.

Understand Appointment of Auditors under Companies Act 2013

An auditor reports to the members, so the members, not the management, normally choose the auditor. Section 139 sets out who appoints, when, and for how long. Section 141 sets out who can be appointed at all.

Start with subsequent auditors. Every company appoints an individual or a firm at its first AGM. That auditor holds office from the conclusion of that AGM till the conclusion of its sixth AGM, and thereafter till the conclusion of every sixth meeting. In practice this is a five-year term. Appointment includes re-appointment. Before appointing, the company must get the auditor's written consent and a certificate that the appointment is within the prescribed conditions. The certificate must also say whether the auditor satisfies the criteria in Section 141. After appointment, the company must inform the auditor and file a notice with the Registrar within fifteen days of the meeting.

Next, the first auditor. It is not appointed by the members at an AGM, because no AGM has happened yet. In a company other than a Government company, the Board appoints the first auditor within thirty days of registration. If the Board fails, it must inform the members, who appoint the auditor at an extraordinary general meeting within ninety days. This auditor holds office till the conclusion of the first AGM. For a Government company or one owned or controlled by the Central or State Governments, the Comptroller and Auditor-General of India (CAG) appoints the first auditor within sixty days of registration. If the CAG does not, the Board appoints within the next thirty days. If the Board also fails, the members appoint within sixty days at an EGM. Later auditors of such companies are appointed by the CAG within one hundred and eighty days from the start of the financial year.

Rotation applies to listed companies and such other classes as may be prescribed. An individual cannot be appointed for more than one term of five consecutive years. An audit firm cannot be appointed for more than two terms of five consecutive years. After completing the term, the individual or firm is ineligible in the same company for five years. A firm having a common partner with the audit firm whose tenure has expired in the company immediately preceding the financial year cannot be appointed as auditor of the same company for five years. Members may also resolve that the auditing partner and team be rotated, or that more than one auditor conduct the audit.

Finally, eligibility. Only a chartered accountant, or a firm with a majority of its India-practising partners being chartered accountants, can be appointed. Section 141(3) lists the persons who cannot be appointed, for example an officer or employee of the company, or a person holding auditorship of more than twenty companies. The detailed disqualifications are covered in Qualifications and Disqualifications of Auditors.

Key rules to remember

Term of subsequent auditor: Conclusion of 1st AGM (appointment) → conclusion of 6th AGM; Section 139(1). Then till every sixth meeting. This works out to five years.
First auditor (non-Government company): Board: within 30 days of registration → else members at EGM within 90 days; Section 139(6). Holds office till conclusion of first AGM.
First auditor (Government company): CAG: 60 days → Board: next 30 days → members at EGM: 60 days; Section 139(7). Holds office till conclusion of first AGM.
Later auditors of Government company: CAG appoints within 180 days from start of financial year; Section 139(5). Holds office till conclusion of the AGM.
Rotation limits: Individual: max 1 term of 5 years; Firm: max 2 terms of 5 years; cooling-off: 5 years; Section 139(2). Applies to listed companies and prescribed classes.
Casual vacancy (non-CAG company): Board within 30 days; if due to resignation, also company approval at general meeting within 3 months of Board's recommendation; Section 139(8)(i). Auditor holds office till the next AGM.
Casual vacancy (CAG-audited company): CAG within 30 days; else Board within next 30 days; Section 139(8)(ii).
Notice to Registrar: Within 15 days of the meeting of appointment; Section 139(1). Company also informs the auditor.
Re-appointment of retiring auditor: Not disqualified AND no written unwillingness AND no special resolution for another auditor or against him; Section 139(9). All three conditions must be met.

How to solve Appointment of Auditors under Companies Act 2013 questions

Use this method for any question on who appoints an auditor, when, and for how long.

1Identify the company type: Government company (or one controlled by the Government), listed or prescribed class, or an ordinary company.
2Identify the stage: first auditor, auditor at an AGM, or a casual vacancy.
3Name the appointing authority: Board, members (AGM or EGM), or CAG.
4State the time limit from the correct starting point, such as registration, start of the financial year, or the vacancy.
5State the term of office: till the first AGM, till the sixth AGM, or till the next AGM for a casual vacancy.
6Check eligibility under Section 141 and apply rotation limits if the company is listed or of a prescribed class.
7Mention the procedural steps: consent and certificate, informing the auditor, and notice to the Registrar within fifteen days.
8Write a clear conclusion that answers the exact question asked, with the section number.

Quickest way: Who, When, How Long

When to use it: Use this for short MCQs and for opening lines of a descriptive answer.

Write three words in the margin: WHO, WHEN, HOW LONG.
Fill WHO from the stage: first auditor means Board; AGM means members; Government company means CAG.
Fill WHEN with the deadline: 30 days for the Board's first auditor, 90 days for members at EGM, 60 days for CAG's first auditor, 180 days for CAG's later auditor.
Fill HOW LONG: first AGM for the first auditor, sixth AGM for subsequent auditors, next AGM for a casual vacancy.
For rotation, remember 1 and 2 terms of five years, with a five-year gap.

Common mistakes in Appointment of Auditors under Companies Act 2013

Saying members appoint the first auditor at the first AGM.
Students mix up the first auditor with the auditor appointed at the first AGM.
Fix: The Board appoints the first auditor within 30 days of registration. Members appoint the auditor at the first AGM, who then serves till the sixth AGM.
Confusing the time limits of 30, 60, 90 and 180 days.
Several different periods appear in Section 139 and look alike.
Fix: Link each period to its authority: Board 30, CAG first auditor 60, members at EGM 90, CAG later auditor 180 from the start of the financial year.
Applying rotation to every company.
Students remember the term limits (one term for an individual, two terms for a firm) but not the condition that they apply only to listed and prescribed classes of companies.
Fix: Section 139(2) applies to listed companies and prescribed classes. Say so before stating the limits.
Stating that an individual can serve two terms and a firm one term.
The two limits are reversed in memory.
Fix: Individual: one term of five consecutive years. Firm: two terms. Both then face a five-year cooling-off in the same company.
Forgetting the extra approval when a casual vacancy arises from resignation.
Students remember only that the Board fills the vacancy within 30 days.
Fix: If the vacancy is due to resignation, the company must also approve the appointment at a general meeting convened within three months of the Board's recommendation.
Ignoring the filing step after appointment.
Students focus on who appoints and skip procedure.
Fix: Add that the company informs the auditor and files a notice with the Registrar within fifteen days of the meeting, after obtaining consent and a certificate.

Worked examples

Example 1

Alpha Textiles Ltd, a private company owned by private shareholders, was registered on 1 April. It is now 15 May and the Board has not appointed any auditor. Advise the company on who can appoint the first auditor and till when the auditor holds office.

Show the solution

The company is not a Government company, so Section 139(6) applies.
The Board had to appoint the first auditor within thirty days of registration. Thirty days from 1 April ended at the beginning of May, so by 15 May that period has lapsed without an appointment.
Because the Board failed, it must inform the members of the company.
The members must then appoint the auditor at an extraordinary general meeting within ninety days. Section 139(6) does not specify the starting point of these ninety days, so state the period as 'within ninety days' and do not add a starting date of your own.
The first auditor holds office till the conclusion of the first annual general meeting.

Answer: The thirty-day Board period has expired, so the Board must inform the members, who must appoint the first auditor at an EGM within ninety days. The auditor holds office till the conclusion of the first AGM.

Example 2

Bharat Ventures Ltd, a listed company, appointed an audit firm for two consecutive terms of five years each. The firm's term ends at the conclusion of the AGM. Can the firm be re-appointed, and can another firm with a common partner be appointed? Explain.

Show the solution

The company is listed, so the rotation rule in Section 139(2) applies.
An audit firm cannot be appointed for more than two terms of five consecutive years.
The firm has completed two terms, so it is not eligible for re-appointment in the same company for five years from the completion of its term.
Under the further proviso, a firm having a common partner with the audit firm whose tenure has expired in the company immediately preceding the financial year cannot be appointed as auditor of the same company for five years.
The company's right to remove an auditor, and the auditor's right to resign, is not affected by these limits.

Answer: The firm cannot be re-appointed for five years. A firm having a common partner with the firm whose tenure has expired in the company immediately preceding the financial year also cannot be appointed as auditor of the same company for five years. The company must therefore consider only firms that do not have a common partner with the outgoing firm.

Exam tips

For MCQs, memorise the number pairs: 30, 60, 90, 180 days, fifteen days for Registrar notice, five years and two terms.
In descriptive answers, always state the company type first, because the appointing authority changes for Government companies.
Quote section numbers (139(6), 139(8), 139(2)) along with the rule in plain words.
Case-style questions often hide a failure by the Board. Follow the chain: Board, then members at EGM.
Use short headings in written answers: Appointing authority, Time limit, Term, Conditions. This earns step marks.

Practice questions from Statutory Audit under the Companies Act, 2013

Appointment of Auditors under Companies Act 2013 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Appointment of Auditors under Companies Act 2013: frequently asked questions

Who appoints the first auditor of a company?

In a company other than a Government company, the Board appoints the first auditor within thirty days of registration. If the Board fails, it must inform the members, who appoint at an EGM within ninety days. In a Government company, the CAG appoints within sixty days.

What is the term of an auditor under Section 139?

An auditor appointed at the first AGM holds office till the conclusion of the sixth AGM, and thereafter for every sixth meeting. This is effectively five years. A first auditor holds office only till the first AGM.

What are the auditor rotation rules under the Companies Act, 2013?

For listed companies and prescribed classes, an individual can serve one term of five consecutive years and a firm two terms. After that, they are ineligible in the same company for five years. A firm having a common partner with the audit firm whose tenure has expired in the company immediately preceding the financial year cannot be appointed as auditor of the same company for five years.

How is a casual vacancy in the office of auditor filled?

In most companies the Board fills it within thirty days. If the vacancy arises from resignation, the company must also approve the appointment at a general meeting within three months of the Board's recommendation. In CAG-audited companies, the CAG fills it within thirty days, failing which the Board fills it within the next thirty days.