Is audit mandatory for a Private Limited Company in India?

Yes. Statutory audit is mandatory for every Private Limited Company in India under Section 139 of the Companies Act 2013, regardless of turnover or paid-up capital. There is no exemption threshold for Private Limited Companies unlike LLPs or proprietorships. The audited financial statements must be filed with the ROC in Form AOC-4 annually.

What is the deadline to file Form ADT-1 after appointment of auditor?

Form ADT-1 (Notice of Appointment of Auditor) must be filed on the MCA portal within 15 days of the Board meeting or AGM where the auditor was appointed. Late filing attracts a penalty of Rs 100 per day with no maximum cap. A 6-month delay results in Rs 18,000 penalty per filing.

Is statutory audit compulsory for LLPs in India?

Statutory audit is not mandatory for all LLPs. Under Rule 24 of the LLP Rules 2009, an LLP must get its accounts audited only if its annual turnover exceeds Rs 40 lakh or if the partners' contribution exceeds Rs 25 lakh in any financial year. LLPs below both thresholds are exempt from mandatory statutory audit.

Can a company remove an auditor before completion of their 5-year term?

Yes, but the process is heavily regulated. Under Section 140(1), removal of auditor before term end requires: (1) prior approval of the Central Government through Form ADT-2, (2) a Special Resolution at EGM after receiving Central Government approval, and (3) giving the auditor an opportunity to be heard. This process typically takes 60 to 90 days minimum.

What happens if an auditor resigns mid-term?

When a statutory auditor resigns, they must file Form ADT-3 directly on the MCA portal within 30 days of resignation, giving detailed reasons. The company must then fill the casual vacancy: if caused by resignation, the Board must appoint a new auditor within 30 days AND the appointment must be approved by shareholders at an EGM within 3 months. The new auditor appointment must be intimated in Form ADT-1 within 15 days.

📊 Companies Act 2013 · Section 139 · ADT-1 · MCA Filing

How to Appoint an
Auditor in a
Company

Q: Who appoints the first auditor of a newly incorporated company?

Under Section 139(6) of the Companies Act 2013, the first auditor of a company must be appointed by the Board of Directors within 30 days of the company's incorporation. If the Board fails to appoint within 30 days, the shareholders must appoint at a general meeting within 90 days of the date of incorporation. The first auditor holds office until the conclusion of the first Annual General Meeting.

Every company in India must appoint a Chartered Accountant as its statutory auditor under Section 139 of the Companies Act 2013 — within 30 days of incorporation. Missing the deadline or skipping Form ADT-1 attracts penalties up to ₹5,00,000. TAXAJ's CA team handles the full appointment process.

30 Days

After Incorporation

ADT-1

MCA Form

5 Years

First Term

Sec 139

Companies Act

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✦ Auditor Appointment — At a Glance

🆕

First Auditor — Board Appoints

Within 30 days of incorporation · Section 139(6)

📅

Subsequent Auditor — AGM

Shareholders appoint at first AGM · Section 139(1)

⏰

Term of Appointment

5 years · Ratified at each AGM (where applicable)

📋

ADT-1 Filing on MCA

Within 15 days of appointment · ₹100/day penalty

🔄

Rotation Mandatory?

Listed + large companies — mandatory every 5/10 years

⚠️

Casual Vacancy Filling

Board must fill within 30 days · EGM if caused by resignation

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What Is Appointment of Auditor?

Appointment of Auditor Under Companies Act 2013 — Complete Legal Guide

Under Section 139 of the Companies Act 2013, every company incorporated in India is legally required to appoint a Chartered Accountant (CA) or a CA firm as its Statutory Auditor. The auditor's role is to independently examine the company's financial statements and report to shareholders on whether the books of accounts give a true and fair view of the company's financial position.

The appointment of auditor is not a one-time event — it is a recurring compliance requirement at every Annual General Meeting (AGM). A company that fails to appoint an auditor within the prescribed time or fails to file Form ADT-1 on the MCA portal faces penalties up to ₹5,00,000 — and the directors responsible can face imprisonment of up to 1 year.

Who is a Statutory Auditor? A statutory auditor is a qualified Chartered Accountant (CA) who holds a valid Certificate of Practice issued by the Institute of Chartered Accountants of India (ICAI). The CA must not have any disqualification under Section 141 — must not be a director, officer, or employee of the company; must not be indebted to the company; and must hold a valid peer review certificate (mandatory for listed companies).

Which Companies Must Appoint an Auditor?

The following entities must mandatorily appoint a statutory auditor under Indian law:

Private Limited Companies — from incorporation, Section 139
Public Limited Companies — from incorporation, stricter rotation rules
One Person Companies (OPC) — from incorporation, Board appoints
Section 8 Companies — mandatory despite non-profit nature
Producer Companies — mandatory under Companies Act 2013
Nidhi Companies — mandatory with higher disclosure requirements

Is Audit Mandatory for LLPs?

Unlike companies, LLPs (Limited Liability Partnerships) are not mandatorily required to appoint a statutory auditor unless their annual turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh. LLPs below these thresholds are exempt from audit but must still file Form 11 (Annual Return) and Form 8 (Statement of Accounts) with the MCA. LLP compliance is handled differently from company compliance.

Key Difference: First Auditor vs Subsequent Auditors

There are two distinct appointment scenarios: the first auditor (appointed by the Board of Directors within 30 days of incorporation) and subsequent auditors (appointed by shareholders at the AGM for a 5-year term). The procedure, authority, and MCA filing requirements differ between these two scenarios.

Appointment Scenarios

Choose Your Scenario — Procedure & Compliance

The appointment process differs by scenario. Select the one that applies to your company.

🆕

First Auditor — New Company Appointment

Section 139(6) · Within 30 days of incorporation · Board of Directors appoints

When a company is newly incorporated, the Board of Directors must appoint the first auditor within 30 days from the date of registration. This appointment is made by a Board resolution passed at the first Board meeting. The first auditor holds office until the conclusion of the first Annual General Meeting (AGM). If the Board fails to appoint within 30 days, the shareholders must appoint at a general meeting within 90 days. The first auditor does NOT require an ADT-1 filing — but TAXAJ recommends filing it as a good practice to update MCA records.

Procedure

Board Meeting convened with 48-hour notice
Obtain consent letter from proposed auditor
Obtain Certificate of Eligibility (not disqualified under Sec 141)
Pass Board Resolution appointing the CA / CA Firm
Intimation to auditor within 7 days of appointment
File Form ADT-1 on MCA within 15 days (recommended)

Documents Required

Consent letter from auditor in writing
ICAI membership certificate of auditor
Certificate that they are not disqualified
Copy of Certificate of Incorporation
PAN and address of the CA firm
Board resolution for appointment

✅ TAXAJ handles: Consent letter drafting, eligibility verification with ICAI database, Board resolution drafting, intimation letter, and ADT-1 filing on MCA within same day of Board meeting.

📅

Subsequent Auditor — Appointment at AGM

Section 139(1) · At first AGM · 5-year term · ADT-1 mandatory within 15 days

At the first AGM (which must be held within 18 months of incorporation or 9 months of the first financial year end, whichever is earlier), shareholders must appoint a statutory auditor for a term of 5 consecutive years. The appointment is made by passing an ordinary resolution at the AGM. After appointment, the company must file Form ADT-1 on MCA within 15 days. Failure to file ADT-1 attracts ₹100 per day penalty. The appointment is renewed at each subsequent AGM through ratification (for companies where ratification is required — primarily unlisted public companies).

AGM Appointment Procedure

Obtain consent and eligibility certificate from proposed auditor
Include auditor appointment in AGM Notice / Agenda
Pass ordinary resolution at AGM
Issue letter of appointment to auditor
File ADT-1 on MCA within 15 days of AGM
Update statutory registers and AGM minutes

Who Ratifies at AGM?

Private Limited Companies — ratification at each AGM no longer mandatory post-2017 amendment; but recommended as good governance
Unlisted Public Companies — ratification recommended
Listed Companies — strict rotation rules; no ratification of same firm after 2 terms
OPCs and Small Companies — appointment for 5 years, no annual ratification needed

⚠️ ADT-1 Penalty: Filing ADT-1 after 15 days of AGM: ₹100 per day with no maximum cap. A 6-month delay = ₹18,000 penalty per filing. TAXAJ files ADT-1 within 24–48 hours of AGM.

⚠️

Filling a Casual Vacancy

Section 139(8) · Within 30 days · EGM if vacancy by resignation

A casual vacancy in the office of auditor arises when the existing auditor vacates their position mid-term — due to resignation, death, disqualification, or incapacity. The procedure for filling a casual vacancy depends on why the vacancy arose: If the vacancy is caused by anything other than resignation (death, disqualification), the Board of Directors can fill the vacancy within 30 days. If caused by resignation, the Board must fill it within 30 days AND the appointment must be approved by shareholders at an EGM within 3 months. This extra step is mandatory under the Companies Act 2013 and cannot be skipped.

Vacancy by Death / Disqualification

Board Resolution within 30 days of vacancy
Obtain consent + eligibility certificate from new auditor
Intimation to new auditor within 7 days
File ADT-1 on MCA within 15 days of Board appointment

Vacancy by Resignation

Board Resolution within 30 days
Obtain consent + eligibility from new auditor
EGM must be convened within 3 months to ratify
Ordinary resolution at EGM
ADT-1 filing within 15 days of EGM approval

⚠️ Resignation Note: When an auditor resigns, they must file Form ADT-3 directly with the MCA within 30 days of resignation, giving reasons. Both the company and the resigning auditor have separate MCA obligations.

🔄

Change or Removal of Auditor

Section 140 · Central Government approval for removal · Special Resolution

Removing a statutory auditor before the expiry of their term is a heavily regulated process under Section 140. The company cannot simply pass a Board resolution to remove an auditor. The process requires: (1) prior approval of the Central Government (Ministry of Corporate Affairs) in Form ADT-2, (2) a Special Resolution at EGM after Central Government approval, and (3) giving the auditor an opportunity to be heard. Voluntary change at the end of term (after 5 years) is simpler — the company does not reappoint and instead appoints a new auditor at AGM through ordinary resolution.

Removal Before Term End

Board resolution authorising application to Central Govt
Application in Form ADT-2 to MCA with reasons
Central Government approval (usually 60–90 days)
Special Resolution at EGM (majority 3/4 of members)
File ADT-1 for new auditor within 15 days of appointment

Change at End of Term

No renewal at AGM — don't pass reappointment resolution
Appoint new CA firm at AGM through ordinary resolution
Outgoing auditor — no special procedure required
File ADT-1 for new auditor within 15 days of AGM
Update statutory registers and AGM minutes

✅ Mandatory Rotation: Listed companies and large unlisted public companies must mandatorily rotate their auditor / audit firm every 5 years (individual CA) or 10 years (CA firm) under Section 139(2). Not applicable to Private Limited Companies unless voluntarily adopted.

🏛️

Government Company — CAG Appoints

Section 139(5) · Comptroller & Auditor General of India appoints

For Government Companies (where Central or State Government holds 51%+ shareholding), the statutory auditor is appointed by the Comptroller and Auditor General of India (CAG) under Section 139(5) — not by the Board or shareholders. The CAG appoints the auditor within 60 days from the date of company registration. If CAG fails to appoint within 60 days, the Board can appoint within the next 30 days, and if the Board also fails, the members can appoint at a general meeting within 60 days. Government companies also require a Supplementary Audit by CAG after the regular statutory audit is completed.

CAG Appointment Process

CAG receives intimation from company upon incorporation
CAG selects and appoints empanelled CA firm
CAG appointment within 60 days
If CAG fails: Board appoints within next 30 days
Company files ADT-1 after CAG/Board appointment

Supplementary Audit

CAG conducts supplementary audit within 60 days of statutory audit completion
Comments by CAG included in Director's Report
Applies to all Government companies and deemed Government companies

✅ Note: Section 8 companies (NGOs), Nidhi companies, and NBFC-licensed entities that are also Government companies follow this route. Section 8 compliance has additional audit requirements under FCRA if foreign funds are received.

Step-by-Step Procedure

Complete Process — Appointment of Auditor (Private Limited Company)

Standard procedure for appointing a subsequent auditor at the AGM — the most common scenario for most companies.

Identify & Select the Auditor

Select a qualified Chartered Accountant (CA) or CA firm registered with the ICAI. The proposed auditor must not be disqualified under Section 141 — must not be an officer, employee, director, or partner of the company; must not hold securities in the company; must not be indebted to the company; and the firm must not have been auditor for more than 2 consecutive terms (for companies subject to rotation). Verify ICAI membership on the official ICAI website before appointment.

📋 Pre-Appointment Check: Verify ICAI membership number, active COP status

ICAI Registration VerificationPeer Review Certificate (listed cos)

Obtain Written Consent from the Proposed Auditor

Under Section 139(1) read with Rule 4(1) of the Companies (Audit and Auditors) Rules 2014, the company must obtain a written consent from the proposed auditor before appointing them. This consent must confirm that the auditor is willing to be appointed and that they meet all eligibility conditions. The consent letter is a mandatory pre-appointment document — appointment without written consent is procedurally defective.

📋 Mandatory pre-appointment document

Consent LetterEligibility Certificate (Sec 141)

Obtain Certificate of Eligibility

Along with the consent, the proposed auditor must provide a Certificate of Eligibility confirming they satisfy all conditions under Section 141 and that they have not been disqualified. For CA firms, the certificate must confirm that the majority of partners are practicing CAs. This certificate is attached to the ADT-1 filing as a mandatory attachment.

📋 Attached as mandatory ADT-1 annexure

Section 141 Eligibility CertificateICAI FRN (Firm Registration No.)

Place on AGM Agenda — Notice to Members

The item for appointment of statutory auditor must be included in the AGM notice sent to all members at least 21 days before the AGM. The notice must clearly state that the appointment is for 5 years (or until the next AGM for ratification where applicable) and include the proposed auditor's name and ICAI registration number. For companies that send shorter-notice AGM, at least 95% member consent by value is required.

📅 AGM Notice: Minimum 21 days before meeting

AGM Notice (21 days)Agenda Item — Auditor Appointment

Pass Ordinary Resolution at AGM

At the AGM, members pass an ordinary resolution (simple majority — more than 50% of members present and voting) to appoint the auditor for a term of 5 years. The resolution must specify the auditor's name, ICAI number, firm registration number, period of appointment, and remuneration (or authorisation to the Board to fix remuneration). The resolution is recorded in the AGM Minutes Book within 30 days of the meeting.

📝 Ordinary Resolution — simple majority sufficient

AGM ResolutionMinutes Book — within 30 days

Issue Letter of Appointment to Auditor

Within 7 days of AGM, the company must issue a formal Letter of Appointment to the auditor, informing them of the appointment, the period, the remuneration terms, and any specific requirements. This letter triggers the auditor's acceptance obligation — the auditor must confirm acceptance in writing. Intimation to previous auditor (outgoing) is also required under professional ethics.

📋 Within 7 days of AGM

Letter of AppointmentAuditor Acceptance Letter

File Form ADT-1 on MCA Portal

The most critical compliance step — file Form ADT-1 (Notice of Appointment of Auditor) on the MCA portal within 15 days of the AGM or Board meeting where the appointment was made. ADT-1 must be signed using the Director's DSC. Attachments: consent letter, eligibility certificate, copy of AGM resolution / Board resolution. ADT-1 must be filed for every appointment — first, subsequent, casual vacancy filling, and change of auditor.

⏰ Within 15 days — ₹100/day penalty for delay

Form ADT-1 (MCA)Director DSC for signingConsent Letter (Attachment)Eligibility Certificate (Attachment)AGM Resolution (Attachment)

Forms & Filings

MCA Forms — Appointment, Removal & Resignation of Auditor

All forms are filed electronically on the MCA V3 portal using Director / Auditor DSC. TAXAJ prepares, certifies, and files all forms.

Form ADT-1

Notice of Appointment

Filed by company within 15 days of appointment of auditor at Board meeting or AGM. Mandatory for every appointment — first, subsequent, casual vacancy, and change.

Filed by: Company · 15 days

Form ADT-2

Application for Removal

Filed by company to seek Central Government approval before removing an auditor before expiry of their term under Section 140(1). Not required for natural end of term.

Filed by: Company · Pre-removal

Form ADT-3

Resignation Notice

Filed by the auditor directly on MCA portal within 30 days of resignation, giving detailed reasons for resignation under Section 140(2). The company also records this in its register.

Filed by: Auditor · 30 days

Form ADT-4

Special Auditor's Report

Filed when a Special Auditor appointed by Central Government / Tribunal submits a report under Section 143(12). Not commonly required for normal companies.

Filed by: Special Auditor

Consent Letter

Auditor's Written Consent

Mandatory pre-appointment document — auditor's written confirmation of willingness to be appointed and eligibility under Section 141. Attached to ADT-1 as mandatory annexure.

Mandatory annexure · Pre-appointment

Eligibility Certificate

Section 141 Certificate

Certificate from auditor confirming they meet all eligibility conditions — no disqualification, no security holding, not a relative / employee / officer of company. Attached to ADT-1.

Mandatory with ADT-1

Deadlines & Penalties

Appointment of Auditor — Deadlines, Penalties & Consequences

Non-compliance with auditor appointment provisions carries both monetary penalties and potential imprisonment. TAXAJ tracks every deadline automatically.

Requirement	Section	Deadline	Company Penalty	Officer / Auditor Penalty
Appointment Filing
Form ADT-1 filing	139(1)	Within 15 days of appointment	₹25,000–₹5,00,000	₹25,000–₹1,00,000
First auditor — Board appointment	139(6)	Within 30 days of incorporation	₹25,000–₹5,00,000	Imprisonment up to 1 yr
Casual vacancy filling	139(8)	Board: 30 days · EGM (if resignation): 3 months	₹25,000–₹5,00,000	₹25,000–₹1,00,000
Auditor Resignation
Auditor files ADT-3	140(2)	Within 30 days of resignation	—	₹50,000–₹5,00,000 (auditor)
Removal
Form ADT-2 — CG approval	140(1)	Before removal	₹25,000–₹5,00,000	Imprisonment up to 1 yr
Special Resolution at EGM	140(1)	After CG approval	Removal invalid without SR	—
Non-Appointment
No auditor at all	139	Ongoing	₹25,000–₹5,00,000	Imprisonment up to 1 yr + fine

⚠️ Note: Non-filing of ADT-1 is one of the most commonly discovered non-compliances during Secretarial Audit. Companies incorporated 3–5 years ago that never filed ADT-1 for their first AGM appointment often face compounding requests from ROC. TAXAJ assists in compounding applications and regularisation of past defaults.

Eligibility & Disqualifications

Who Can Be Appointed as Statutory Auditor? — Section 141

Not every CA can be appointed as statutory auditor. Section 141 specifies both eligibility criteria and grounds for disqualification.

✅ Eligible to be Appointed

✓Chartered Accountant holding valid Certificate of Practice (COP) from ICAI

✓Partnership firm or LLP where majority of partners are practicing CAs in India

✓Proprietorship firm of a practicing CA

✓CA firm must have a valid Firm Registration Number (FRN) from ICAI

✓Listed companies: CA firm must have a Peer Review Certificate from ICAI

❌ Cannot Be Appointed (Section 141 Disqualifications)

✗A body corporate (cannot be a private/public company — only individual CA or CA firm)

✗Officer, director, employee, or partner of the company or its subsidiary / holding company

✗A person who holds securities / financial interest in the company or its associates

✗A person indebted to the company or whose relatives are in key management positions

✗Person convicted of fraud or offence involving moral turpitude in the last 10 years

✗A person providing management consultancy, actuarial, financial advisory, internal audit, or investment advisory services to the company (prohibited non-audit services)

TAXAJ Service Packages

Appointment of Auditor — Service & Pricing

TAXAJ handles consent letter drafting, eligibility verification, AGM agenda preparation, resolution drafting, ADT-1 filing, and auditor intimation.

First Auditor

^₹1,999

Board appointment · New company

Board resolution drafting
Consent letter template
Eligibility certificate format
Intimation letter to auditor
ADT-1 filing on MCA (recommended)
ICAI membership verification

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Appointment of Auditor — Frequently Asked Questions

Yes. Audit is mandatory for every Private Limited Company in India under Section 139 of the Companies Act 2013, regardless of turnover, paid-up capital, or age of the company. There is no turnover threshold below which a Private Limited Company can avoid statutory audit — unlike proprietorship firms and LLPs. The audited financial statements must be filed with the ROC annually in Form AOC-4. Non-filing attracts ₹100 per day penalty with no upper cap.

No. Under Section 139(1), a subsequent auditor must be appointed for a minimum term of 5 consecutive years (subject to ratification at each AGM where applicable). You cannot appoint an auditor for 1 year or 2 years at the AGM — the resolution must specify the 5-year term. The auditor can resign voluntarily during the term (filing ADT-3) or be removed following the strict Section 140 procedure. The 1-year appointment was abolished by the Companies Act 2013 to ensure auditor continuity and independence.

The Companies Act 2013 under Section 139(6) does not explicitly require ADT-1 filing for the first auditor appointed by the Board — unlike the subsequent auditor appointment at AGM where ADT-1 is mandatory under Rule 4(2). However, the MCA's ROC regularly asks for confirmation of auditor appointment during routine scrutiny, and TAXAJ strongly recommends filing ADT-1 even for first auditor Board appointments. Many companies that did not file ADT-1 for Board-appointed first auditors have faced queries from ROC during annual scrutiny of MCA filings.

Non-appointment of a statutory auditor is a serious offence under the Companies Act 2013. Consequences include: (1) Monetary penalty on the company of ₹25,000 to ₹5,00,000 and on every defaulting officer (typically directors) of ₹25,000 to ₹1,00,000, (2) Imprisonment of up to 1 year for directors responsible, (3) Annual filing (AOC-4 and MGT-7) cannot be completed without audited financial statements — leading to cascading late filing penalties of ₹100 per day each, (4) Company's accounts cannot be deemed "adopted" without auditor certification. Companies with a gap of 2–3 years in auditor appointment face significant compounding penalties.

Under Section 139(2) of the Companies Act 2013, mandatory auditor rotation applies to: (1) Listed companies, (2) Unlisted public companies with paid-up capital of ₹10 crore or more, (3) Private companies with paid-up capital of ₹50 crore or more, (4) Companies with public borrowings from banks/FIs of ₹50 crore or more. These companies must rotate their auditor: individual CA — maximum 1 term of 5 years, CA firm — maximum 2 terms of 5 years each (total 10 years). After rotation, a 5-year cooling period applies before the same auditor/firm can be reappointed. Private Limited Companies below the thresholds are NOT subject to mandatory rotation — they can continue with the same auditor indefinitely.

Statutory audit is NOT mandatory for all LLPs. Under Rule 24 of the LLP Rules 2009, LLP accounts must be audited only if: (1) annual turnover exceeds ₹40 lakh in any financial year, or (2) the partner's contribution exceeds ₹25 lakh. LLPs below both thresholds are exempt from statutory audit but must still file Form 8 (Statement of Accounts) and Form 11 (Annual Return) with MCA annually. Note: if an LLP voluntarily gets an audit, it must comply with auditor appointment formalities. TAXAJ recommends audit for LLPs with significant turnover for better internal controls and investor confidence.

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