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CA Intermediate · Corporate and Other Laws · Audit and Auditors

Meera Textiles Ltd, an unlisted public company, appointed M/s Rao & Co., a chartered accountant firm, as its auditor at its first AGM for a term of five consecutive years. Under the Companies Act, 2013, what is the correct position regarding ratification of this appointment at each subsequent AGM?

Annual ratification is not required. After the 2017 amendment, an auditor appointed for a five-year term continues in office for that term without the members ratifying the appointment at every AGM, so the old rule of yearly ratification no longer applies.

  1. ARatification at every AGM is required, as the Act demands annual confirmation of the auditor
  2. BRatification at every AGM is not required, because the 2013 Act as amended no longer requires annual ratification of the appointmentCorrect
  3. CRatification is required only if the auditor has been in office for more than three years
  4. DRatification is required only if the company is listed

Explanation

The Companies (Amendment) Act, 2017 removed the requirement of annual ratification of the auditor's appointment. Once appointed for a five-year term, the auditor continues without yearly ratification. The option demanding annual confirmation reflects the old pre-amendment position.

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