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CA Intermediate · Corporate and Other Laws · Audit and Auditors

Kiran Textiles Ltd, an unlisted public company with paid-up capital of Rs 5 crore, wants to appoint its first auditor after incorporation. The Board of Directors, in the absence of any earlier appointment, is considering whom to appoint. Under the Companies Act, 2013, what is the correct position about the first auditor?

The Board appoints the first auditor within 30 days of the company's registration. If the Board fails to do so, the members must appoint the auditor at an extraordinary general meeting within 90 days. The first auditor holds office until the conclusion of the first annual general meeting.

  1. AThe Board may appoint the first auditor within 30 days of registration, and if it fails, members must appoint within 90 days at an extraordinary general meetingCorrect
  2. BThe first auditor must be appointed by the Central Government in every case
  3. CThe first auditor must be appointed by the members at the first general meeting within 30 days of registration
  4. DThe first auditor is appointed by the Registrar of Companies within 30 days of registration

Explanation

For a company other than a government company, the Board appoints the first auditor within 30 days of registration. If the Board fails, it must inform members, who then appoint the auditor at an extraordinary general meeting within 90 days. The auditor holds office until the conclusion of the first annual general meeting. Options that give the power to the Central Government or the Registrar are wrong, and the members do not act first.

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