Important Keywords: First Auditor under Companies Act, 2013, Appointment of First Auditor, Form ADT-1 Filing, First Auditor of a Company, Section 139(6), Section 139(7), Section 139(8), Section 140, Section 141, MCA Amendment 2025, Companies (Audit and Auditors) Amendment Rules, 2025, ROC Filing.
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Overview / First Auditor under Companies Act, 2013.
Whenever a new company is incorporated, one of the first legal compliances it must complete is the appointment of its first auditor. However, many business owners are unaware of who can be appointed as the first auditor, when the appointment should be made, who has the authority to appoint the auditor, and what happens if the company fails to comply with this requirement.
If you also have these questions, don't worry. In this article, we will explain everything you need to know about the appointment of the first auditor under the Companies Act, 2013 in simple and easy-to-understand language.
An auditor plays an important role in every company. They independently examine the company's financial records and help ensure that the financial statements present a true and fair view of the company's financial position. This not only helps the company comply with the law but also builds confidence among shareholders, investors, banks, and other stakeholders.
Since a newly incorporated company starts carrying out financial transactions soon after its incorporation, it is important to appoint an auditor at the earliest. For this reason, the Companies Act, 2013 requires every company to appoint its first auditor within the prescribed time.
In this article, we will discuss who can be appointed as the first auditor, the eligibility criteria, the appointment process, the required documents, the time limit for appointment, the role and responsibilities of the first auditor, common mistakes made by companies, and the consequences of non-compliance. By the end of this article, you will have a clear understanding of the legal provisions relating to the appointment of the first auditor in a company.
Legal Provisions at a Glance
| Provision | Purpose |
|---|---|
| Section 139(6) | Appointment of first auditor |
| Section 139(1) | Appointment after first AGM |
| Section 139(7) | Government companies |
| Section 139(8) | Casual vacancy |
| Section 140 | Removal of auditor |
| Section 141 | Eligibility and disqualifications |
| Rule 4 | Notice to ROC through ADT-1 |
Who is First Auditor?
When a new company is incorporated, one of the first legal requirements is to appoint a first auditor. The first auditor is responsible for checking the company's books of accounts and financial statements to ensure that everything is recorded correctly and follows the law.
In India, a person can be appointed as an auditor only if they are a Chartered Accountant (CA) recognised under the Chartered Accountants Act, 1949 and meet the eligibility requirements prescribed under the Companies Act, 2013. Since every company is required to have its financial statements audited, appointing an auditor is not optional—it's a legal requirement.
The first auditor continues in office until the company's first Annual General Meeting (AGM). After that, the shareholders appoint the company's regular auditor in accordance with the Companies Act, 2013.
Key functions of an auditor
Some of the main responsibilities of the first auditor are:
Checks the company's financial records to make sure all transactions are recorded correctly.
Reviews the company's initial financial transactions after incorporation.
Ensures the company follows the applicable legal and accounting requirements while maintaining its financial records.
Identifies mistakes or irregularities, if any, in the books of accounts.
Examines the financial statements and confirms whether they present a true and fair view of the company's financial position.
Simply put, you can think of the first auditor as a financial reviewer who checks whether the company has started maintaining its accounts properly. Their role is to help ensure that the company's financial records are accurate, reliable, and prepared in accordance with the law.
Legal frame work of First auditor appointment
as per section 139(i) of the companies act 2013, states that a company chooses its auditor at its first AGM. The auditor normally remains appointed for the next five years (up to the sixth AGM), after which the company needs to appoint or reappoint an auditor again according to the legal process.
Proviso of subsection (1) explains that before appointing an auditor, the company must make sure that the auditor is willing to take the role and is eligible under the law. After the appointment, the company must inform both the auditor and the ROC. These rules apply every time an auditor is appointed, including when an existing auditor is reappointed.
Sub-section (2) of Section 139 says that certain companies cannot continue with the same auditor for an unlimited period. An individual auditor can work as the company's auditor for up to 5 continuous years, while an audit firm can continue for up to 10 continuous years. Once this period is over, they must wait for 5 years before they can be appointed as the auditor of the same company again. This rule helps bring a fresh perspective to the audit process and reduces the chances of bias, making the company's financial reporting more reliable and transparent.
This sub-section (3) gives shareholders the power to decide how the company's accounts are audited. They can change the audit team after some time or appoint more than one auditor to check the company's financial records.
Eligibility criteria for appointing the first auditor
As per Section 141(1) and Section 141(2) of the Companies Act, 2013, these provisions explain who is eligible to become a company's auditor.
According to these provisions, only a qualified Chartered Accountant (CA) can be appointed as an auditor of a company.
A company can also appoint an audit firm or a Limited Liability Partnership (LLP) as its auditor. However, the majority of the partners in the firm must be qualified Chartered Accountants practising in India. Further, only those partners who are Chartered Accountants are authorised to carry out the audit and sign the audit report on behalf of the firm.
Who are not eligible to be appointed as a company's auditor?
As per section 141 (3), The following persons cannot be appointed as a company's auditor:
- An employee or officer of the company.
- A person who has a close business or financial relationship with the company.
- A person whose relative is a director or a Key Managerial Personnel (KMP) of the company.
- A person who holds shares or has a significant financial interest in the company (except as permitted by law).
- A person who owes money to the company or has guaranteed someone else's debt to the company beyond the prescribed limit.
- A person who is already employed full-time elsewhere or is the auditor of more than the prescribed number of companies.
- A person who has been convicted of fraud within the last 10 years.
- A person who provides certain prohibited services to the company, as these may affect the auditor's independence.
*The law does not allow anyone to become an auditor if their personal, financial, or professional relationship with the company could affect their ability to conduct an independent and unbiased audit.
Which Companies must appoint a First Auditor?
- Private Limited Companies
- Public Companies
- One Person Companies (OPCs)
- Government Companies (with a different appointment process)
MCA Amendment 2025: A major change in the filing of Form ADT-1
The Ministry of Corporate Affairs (MCA) introduced a significant change through the Companies (Audit and Auditors) Amendment Rules, 2025, notified under G.S.R. 359(E). These amendments came into force on 14 July 2025 and brought much-needed clarity regarding the filing of Form ADT-1 for the appointment of the first auditor.
Earlier, there was confusion about whether a company had to file Form ADT-1 for the appointment of its first auditor. The 2025 amendment has now removed that confusion.
What changed?
The MCA updated Form ADT-1 by adding separate options for:
- First Auditor appointed by the Board of Directors
- First Auditor appointed by the Members
- First Auditor appointed by the Comptroller and Auditor General (C&AG) in the case of Government companies
By including these options in the form, the MCA has made it clear that Form ADT-1 must also be filed for the appointment of the first auditor.
What is the rule now? (From 14 July 2025)
If your company appoints its first auditor after 14 July 2025, you must file Form ADT-1 with the Registrar of Companies (ROC).
This rule applies whether the first auditor is appointed by:
- The Board of Directors,
- The shareholders at an Extraordinary General Meeting (EGM), or
- The C&AG in the case of a Government company.
The company must file Form ADT-1 within 15 days from the date the auditor is appointed.
In simple words, every appointment of the first auditor must now be reported to the ROC through Form ADT-1.
How to Appoint the First Auditor after the Amendment
The process is simple:
Step 1: Board Appoints the First Auditor
The Board of Directors should appoint the first auditor within 30 days of the company's incorporation by passing a Board Resolution.
Step 2: If the Board doesn't appoint
If the Board misses the 30-day deadline, the shareholders must appoint the first auditor within the next 90 days at an Extraordinary General Meeting (EGM).
Step 3: Collect the Required documents
Before filing ADT-1, keep these documents ready:
- Written consent from the auditor
- Certificate confirming that the auditor is eligible and not disqualified under Section 141
- Copy of the Board Resolution or Shareholders' Resolution
- Appointment or engagement letter issued to the auditor
Step 4: File Form ADT-1
Once the auditor is appointed, the company must file Form ADT-1 with the ROC within 15 days.
Step 5: Auditor's Tenure
The first auditor will continue in office until the conclusion of the company's first Annual General Meeting (AGM).
Penalty for non-appointing of first auditor?
If a company fails to appoint the first auditor or violate any of the provisions of Sections 139 to 146 of the Companies Act, 2013, penalties may be imposed under Section 147 of the Act.
The penalties are as follows:
- For the Company: The company may be fined from ₹25,000 up to ₹5,00,000.
- For the Officers in Default: Every officer responsible for the non-compliance may be fined from ₹10,000 up to ₹1,00,000.
- For the Auditor: If an auditor violates the provisions relating to the appointment or duties of an auditor, they may be fined from ₹25,000 up to ₹5,00,000, or up to four times their remuneration, whichever is lower.
If an auditor intentionally violates the law to mislead the company, its shareholders, creditors, or tax authorities, they may also face imprisonment for up to one year, along with a fine ranging from ₹50,000 to ₹25,00,000, or up to eight times their remuneration, whichever is lower.
To avoid unnecessary penalties, it is best to complete the appointment process and file ADT-1 within the prescribed time.
Professional views
Before 14 July 2025, many professionals believed that filing Form ADT-1 for the first auditor was optional because the law was not very clear.
Now, the MCA has removed that confusion by updating the form itself. Since Form ADT-1 now specifically includes the appointment of the first auditor, companies should treat its filing as a mandatory compliance requirement and complete it within the prescribed timeline.
Fees for Form ADT-1
The government filing fee for Form ADT-1 is prescribed according to the company's authorized share capital. The applicable fee is listed below.
| Authorized share capital | Government filing fee |
|---|---|
| Up to ₹1,00,000 | ₹200 |
| Above ₹1,00,000 up to ₹5,00,000 | ₹300 |
| Above ₹5,00,000 up to ₹10,00,000 | ₹400 |
| Above ₹10,00,000 | ₹600 |
Note: A company that does not have a share capital must pay a flat government filing fee of ₹200.
Timeline and Tenure of the First Auditor
Section 139(6) of the Companies Act, 2013 explains when the first auditor should be appointed and how long they will remain in office.
According to this provision:
- The Board of Directors must appoint the first auditor within 30 days from the date the company is incorporated.
- If the Board does not appoint the first auditor within this time, the shareholders must appoint one within the next 90 days by holding an Extraordinary General Meeting (EGM).
- Once appointed, the first auditor continues in office until the conclusion of the company's first Annual General Meeting (AGM).
After the first AGM, the appointment and tenure of the regular auditor are governed by Section 139(1) of the Companies Act, 2013. and 139(1) simply says the tenure of the auditor appointed at the first AGM (holds office from the conclusion of the first AGM until the conclusion of the sixth AGM, subject to the Act).
Let's understand by this Diagram:
Company Incorporated
│
▼
Within 30 Days
Board appoints First Auditor
│
▼
If Board fails
│
Within next 90 Days
Members appoint at EGM
│
▼
File ADT-1 within 15 Days
│
▼
First AGM
│
▼
Regular Auditor Appointed
Difference Between First Auditor and Statutory Auditor
Here are the key differences between the first auditor and the statutory auditor:
| First Auditor | Statutory Auditor |
|---|---|
| Appointed after incorporation | Appointed at first AGM |
| Board appoints | Members appoint |
| Holds office till first AGM | Holds office till sixth AGM |
| Section 139(6) | Section 139(1) |
Conclusion
In this article, we have explained everything you need to know about the first auditor and the filing of Form ADT-1, including who appoints the first auditor, the appointment process, the required documents, the due date for filing ADT-1, and the important changes introduced by the Companies (Audit and Auditors) Amendment Rules, 2025.
After the 2025 amendment, filing Form ADT-1 for the appointment of the first auditor has become a mandatory compliance requirement. Therefore, companies should appoint the first auditor within the prescribed time and file ADT-1 on time to avoid penalties and ensure compliance with the Companies Act, 2013.
If you need assistance with the appointment of the first auditor, filing Form ADT-1, or any other company compliance, you can contact Finodha. Our experts will guide you through the entire process and help ensure your company meets all legal requirements smoothly and accurately.
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Disclaimer: The information in this article is for general purposes only and may not fit your personal situation. It is not legal, financial, or professional advice, and you should not rely on it as such. Before making any decisions, consider if this information applies to you and, if needed, get advice from a professional. The information is correct at the time of publication. While we have tried to ensure it is accurate, Finodha.in is not responsible for any loss or damage caused by using this information.
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Hi, Go On, Tell Us What You Think about the Form ADT-1 filing! Did we miss something to explain in this Article? Come on! Tell us what you think about our article in the comment/e-mail section.Frequently Asked Questions (FAQs)
Question. Who is responsible for appointing an auditor in a company?
Answer. The appointment of an auditor depends on the type of appointment. The Board of Directors appoints the first auditor, shareholders appoint the statutory auditor at the AGM, and the Comptroller and Auditor General (CAG) appoints the auditor of Government companies, as prescribed under the Companies Act, 2013.
Question. Who cannot be appointed as an auditor?
Answer. A person who is disqualified under Section 141 of the Companies Act, 2013 cannot be appointed as an auditor.
Question. Who can be appointed as the first auditor of a company?
Answer. A company can appoint any qualified Chartered Accountant or Chartered Accountant firm as its first auditor, as long as they are legally eligible to act as an auditor and are not disqualified under section 141 of the Companies Act, 2013.
Question. What is the term of the first auditor?
Answer. Under Section 139(6) of the Companies Act, 2013, the first auditor holds office from the date of appointment until the conclusion of the first Annual General Meeting (AGM).
Question. Is it mandatory to appoint the first auditor at the first Board Meeting?
Answer. No. There is no legal requirement to appoint the first auditor at the first Board Meeting itself. However, the Board of Directors must ensure that the appointment is made within 30 days from the date of incorporation.
Question. Can the first auditor be changed before the first AGM?
Answer. Yes. A company can change its first auditor before the first AGM, but only after complying with the provisions of the Companies Act, 2013. This generally requires prior approval of the Central Government and approval of the members by a special resolution.
Question. Can the auditor be removed before the completion of the tenure?
Answer. Yes. Section 140(1) of the Companies Act, 2013 allows a company to remove an auditor before the completion of their tenure. However, the company cannot remove the auditor at its own discretion. It must first obtain the prior approval of the Central Government and then pass a special resolution of the members before the auditor can be removed.
Question. Can the directors remove the auditor?
Answer. No. The directors does not have the authority to remove an auditor on its own.
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Question. What happens if the first auditor resigns before the first AGM?
Answer. If the first auditor resigns before the first AGM, the vacancy is treated as a casual vacancy under section 139(8) of the Companies Act, 2013. The Board of Directors must appoint a new auditor within 30 days, and since the vacancy is due to resignation, the appointment must be approved by the members at a general meeting within three months of the Board's recommendation.
Question. How is the statutory auditor appointed after the first auditor?
Answer. Once the first auditor's term ends at the first AGM, the members (shareholders) appoint the statutory auditor by passing an ordinary resolution at the Annual General Meeting (AGM).
Question. What happens if the first auditor is appointed by the CAG?
Answer. For a Government company, the first auditor is appointed by the Comptroller and Auditor General (CAG) of India under Section 139(7) of the Companies Act, 2013.
Question. Who is an auditor?
Answer. An auditor is an independent Chartered Accountant or a firm of Chartered Accountants appointed to examine a company's financial records and report whether its financial statements present a true and fair view in accordance with the Companies Act, 2013.
Question. Why company choose a first auditor?
Answer. A company appoints its first auditor to independently verify its financial records from the beginning and ensure compliance with the Companies Act, 2013.
Question. What is Form ADT-1?
Answer. Form ADT-1 is an e-form filed with the Registrar of Companies (ROC) to notify the appointment of a company's auditor under the Companies Act, 2013.
Question. Is ADT-1 mandatory for the first auditor?
Question. Who appoints the first auditor?
Answer. As per section 139(6) of the companies Act, 2013, company's Board of directors can appoint the first auditor within the 30 days of incorporation.
Question. Can the Board appoint the first auditor?
Answer. Yes. Under Section 139(6) of the Companies Act, 2013, the Board of Directors has the authority to appoint the first auditor within 30 days of the company's incorporation.
Question. What happens if no auditor is appointed?
Answer. If a company does not appoint an auditor on time, it may have to pay penalties and could face difficulties in meeting its legal and financial reporting obligations.
Question. Can the first auditor resign?
Answer. Yes, the first auditor can resign under section 139(8) of the company Act, 2013.
Question. Can the first auditor be removed?
Answer, Yes. It can also be removed, under Section 140(1) of the Companies Act, 2013, including obtaining the prior approval of the Central Government and passing a special resolution.
Question. What is the due date for ADT-1?
Answer. The due date for filing Form ADT-1 is within 15 days from the date of the auditor's appointment.
Question. Is ADT-1 mandatory after the 2025 amendment?
Answer. Yes. From 14 July 2025, Form ADT-1 is mandatory for the appointment of the first auditor following the Companies (Audit and Auditors) Amendment Rules, 2025.
Question. What are the documents required for ADT-1?
Answer. The documents generally required while filing Form ADT-1 include the auditor's consent letter, eligibility certificate under Section 141, Board or Members' Resolution, and any other supporting documents, if applicable.
Question. Is ADT-1 required for OPC?
Answer. Yes. Following the Companies (Audit and Auditors) Amendment Rules, 2025, a One Person Company (OPC) is also required to file Form ADT-1 for the appointment of its auditor.
Question. Is ADT-1 required for a private limited company?
Answer. Yes. A Private Limited Company is required to file Form ADT-1 for the appointment of its auditor in accordance with the Companies Act, 2013 and the applicable rules.
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