The auditor appointment procedure under Section 139 of the Companies Act, 2013 begins early. A newly incorporated company’s Board must appoint its first statutory auditor within 30 days. After that, members appoint an auditor at the AGM, usually for five years, and the company files Form ADT-1 with the Registrar within 15 days.
This guide sets out the procedure under Section 139 of the Companies Act, 2013: eligibility, deadlines by company type, rotation, removal, late fees, penalties and the changes of 2025 and 2026. It is written for directors, finance heads and company secretaries.
Key Takeaways
- Three dates drive the process: day 30 for the first auditor, day 15 for ADT-1, and the sixth AGM for the end of a term.
- Only a practising Chartered Accountant or a CA firm can be appointed, and the written consent and Section 141 eligibility certificate must be collected before appointment.
- File ADT-1 within 15 days. For a first auditor the rules and the revised form differ, so filing is the safer course.
- Rotation applies to listed companies and larger unlisted companies. OPCs and small companies are exempt.
- The Corporate Laws (Amendment) Bill, 2026 is yet to be enacted. Until it is, your company must still appoint an auditor.
How Does the Auditor Appointment Procedure Work Under The Companies Act, 2013?
Section 139 requires every company to appoint an auditor. The sequence is fixed: eligibility check, consent, resolution, then filing. The auditor reports to members, not to management, which separates statutory audit from internal audit.
Point | Rule |
First auditor | Board, within 30 days of incorporation |
Later auditors | Members at the AGM, by ordinary resolution |
Term | From the conclusion of the AGM of appointment to the conclusion of the sixth AGM after it |
ROC filing | Form ADT-1 within 15 days |
Annual ratification | Not required (removed in 2018) |
Who is Eligible To Be a Statutory Auditor?
A practising Chartered Accountant, or a firm or LLP in which the majority of partners practising in India are Chartered Accountants, is eligible. Apply Section 141 before discussing fees. Section 141(3) disqualifies:
Ground | What it means in practice |
Body corporate | Any body corporate other than an LLP |
Officer or employee | An officer or employee of the company, or a partner or employee of one |
Business relationship | Any commercial transaction with the company, subject to Rule 10 exceptions |
Relative of a director or KMP | A person whose relative is a director or key managerial person |
Securities | The auditor or a partner holding any security of the company or its group. A relative may hold up to ₹1 lakh face value, with 60 days to correct an excess |
Indebtedness | The auditor, a relative or a partner owing the company or its group more than ₹5 lakh |
Guarantees | The auditor, a relative or a partner guaranteeing a third party’s debt to the group above ₹1 lakh |
Fraud conviction | Convicted of fraud in the preceding 10 years |
Section 144 services | Providing prohibited non-audit services to the company or its group |
Ceiling | Already auditor of 20 companies |
The 20-company limit is counted per auditor, and partner-wise for firms, excluding OPCs, dormant companies, small companies and private companies with paid-up capital below ₹100 crore. A disqualification arising after appointment makes the auditor vacate office under Section 141(4), creating a casual vacancy.
What Are the Steps in the Auditor Appointment Procedure?
The auditor appointment procedure has six steps, and the order matters.
Step 1: Shortlist and test eligibility.
Verify the ICAI certificate of practice and Firm Registration Number, then run every Section 141 check, the 20-company count and any rotation history, including links to directors’ families.
Step 2: Get the recommendation.
Where an Audit Committee exists, it recommends the auditor and the Board approves the name.
Step 3: Collect the consent letter and eligibility certificate.
The proviso to Section 139(1) requires both before appointment, and Rule 4 prescribes what the certificate must state. Have both in hand before the Board meets, so the resolution can record receipt.
Step 4: Notice and resolution.
The AGM notice names the auditor, term and proposed remuneration, and listed companies add SEBI LODR disclosures. Members then pass an ordinary resolution. The fee can be fixed at the meeting, or the Board can be authorised to fix it.
Step 5: File Form ADT-1
Tell the auditor about the appointment, then file ADT-1 on the MCA portal within 15 days.
Step 6: Record and diarise.
Issue the engagement letter, update the statutory records and note the term end and rotation dates.
What Does the First-Auditor Timeline look like in the Auditor Appointment Procedure?
Take an illustrative company incorporated on 5 August 2026. Section 9 of the General Clauses Act, 1897 excludes the day of the event, so day one is 6 August.
Event | Date | Basis |
Certificate of Incorporation | 5 August 2026 | Day 0 |
Last day for Board to appoint first auditor | 4 September 2026 | 30 days, Section 139(6) |
Last day for ADT-1 if appointed on 4 September | 19 September 2026 | 15 days from appointment |
Members’ EGM window closes if the Board missed its date | 3 November 2026 | 90 days, counted from incorporation as commonly read |
The same counting applies after an AGM: held on 30 September 2026, it makes ADT-1 due on 15 October 2026. When the Board appoints on day 30, ADT-1 falls due by day 45 (30 days to appoint, then 15 to file). Treat day 45 as the target, not the legal outer limit. A Board that misses day 30 moves into the EGM route, which extends the process further.
Planning the first-auditor dates for a newly incorporated company? Our ROC compliance team can check the timeline against your incorporation date.
How Does the Auditor Appointment Procedure Differ by Company Type?
Government companies follow a different route from other companies, because the CAG, not the Board or members, makes the appointment.
Company type | First auditor | Later appointments | Casual vacancy |
Non-government | Board, within 30 days of incorporation | Members at AGM | Board, within 30 days |
Government (CAG-audited) | CAG within 60 days; then Board in the next 30 days; then members at EGM in the next 60 days | CAG, within 180 days of the start of the financial year | CAG within 30 days; then Board in the next 30 days |
If the Board misses its 30-day deadline, it must inform members, who appoint the first auditor at an EGM within 90 days. Many practitioners count the 90 days from incorporation and some from the Board’s intimation, so confirm the position for your case. The first auditor holds office until the first AGM.
A casual vacancy is filled by the Board within 30 days, and on resignation a general meeting must approve the appointment within three months. The new auditor holds office until the next AGM.
What Does Form ADT-1 Require, and is it Mandatory for the First Auditor?
ADT-1 is the company’s filing. Attach the certified resolution, the auditor’s consent and eligibility certificate, and the letter informing the auditor of the appointment.
What does a late ADT-1 cost?
Under the Companies (Registration Offices and Fees) Rules, 2014, as amended in 2022, the additional fee is a multiple of the normal filing fee, which depends on authorised capital. A higher fee applies in specified cases, so check the MCA schedule.
Delay in filing ADT-1 | Additional fee |
Up to 15 days | 1 time the normal fee |
More than 15 and up to 30 days | 2 times |
More than 30 and up to 60 days | 4 times |
More than 60 and up to 90 days | 6 times |
More than 90 and up to 180 days | 10 times |
Beyond 180 days | 12 times |
If the normal fee is ₹300 and the form is filed 45 days late, the additional fee is ₹1,200 and the total ₹1,500. A short delay is inexpensive, but a filing beyond 180 days costs thirteen times the normal fee in total.
Is ADT-1 mandatory for the first auditor? The sources disagree.
Source | Position |
Rule 4(2), Companies (Audit and Auditors) Rules, 2014 | Ties the filing duty to Section 139(1), the AGM appointment, not to the first auditor under Section 139(6) |
Revised ADT-1, effective 14 July 2025 | Adds a “first auditor” option on the form |
Records that the rules do not require it for a first auditor, notes the form’s option, and asks MCA to clarify | |
Several commercial filing portals | Treat filing as mandatory since July 2025 |
Our recommended practice is to file ADT-1 for a first auditor as well, since the cost is small and the acknowledgement (SRN) proves the appointment. A professional review can confirm that consent, certificate and resolution dates align before filing. Our ROC compliance page explains how this works.
Does Auditor Rotation Apply to your Company?
Section 139(2) limits an individual auditor to one term of five consecutive years and an audit firm to two terms (ten years), followed by a five-year cooling-off period. During cooling-off, a firm sharing a partner with the outgoing firm is also barred.
Under Rule 5, rotation applies to listed companies; unlisted public companies with paid-up capital of ₹10 crore or more; private companies with paid-up capital of ₹50 crore or more; and any other company with outstanding loans or borrowings from banks or public financial institutions, or public deposits, of ₹50 crore or more. OPCs and small companies are exempt. Since 1 December 2025 (G.S.R. 880(E)), a small company is a private company with paid-up capital up to ₹10 crore and turnover up to ₹100 crore, subject to statutory exclusions.
Years already served count towards the limit, so start the shortlist two years before the term ends. A company nearing the ₹50 crore threshold may wish to assess its rotation position.
What are the Rules on special notice, Removal and Resignation?
Only resignation is in the auditor’s own hands.
- Special notice: Sections 115 and 140(4) require it to appoint someone other than the retiring auditor, or to not reappoint them. The retiring auditor may make a written representation, which the company must circulate.
- Removal from office during tenure: Section 140(1) provides that it should be through a special resolution after obtaining Central Government approval.
- Resignation: the auditor files Form ADT-3 within 30 days.
How Does Appointment Differ for listed Companies, Government Companies and LLPs?
Entity | What applies |
Remuneration | The Board fixes the first auditor’s fee. Members fix later fees or decide how they are fixed (Section 142) |
Listed company | SEBI LODR Regulation 36(5) requires fees, terms, the basis of recommendation and credentials in the AGM notice. The Audit Committee recommends the auditor |
Government company | The CAG appoints the auditor |
OPC and small company | Exempt from rotation. Statutory audit still applies |
LLP | Section 139 does not apply. Audit is required where turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh, as Rule 24(8) of the LLP Rules is commonly applied |
Which Recent Changes Affect the Auditor Appointment Procedure (2025–2026)?
Two of these three changes took effect in 2025 and are law today. The Bill is still only a proposal.
Change | Status as of 9 November 2026 | Impact |
Revised ADT-1 on MCA V3 | In force since 14 July 2025 | Adds a first-auditor option. Filing is the safer practice |
Small company limits raised to ₹10 crore capital and ₹100 crore turnover (G.S.R. 880(E)) | In force since 1 December 2025 | More companies sit outside rotation. Audit still applies |
Corporate Laws (Amendment) Bill, 2026 (PRS summary) | Introduced 23 March 2026. JPC report presented 3 August 2026. No report of passage found as of 9 November 2026 | Proposes a Section 139(12) audit exemption for prescribed classes, which the JPC would limit to private companies, and an NFRA registration-intimation requirement before appointment. It also proposes doubling the small-company limits to ₹20 crore and ₹200 crore. Not law yet |
Statutory audit continues until any exemption is passed, notified and its conditions met, so check the PRS tracker before relying on the Bill. Each of the 21,859 companies incorporated in May 2026 (Probe42) opened a 30-day first-auditor window, and in our view a missed deadline is a process failure that an incorporation checklist prevents.
What are the Most Common Mistakes in the Auditor Appointment Procedure?
- Appointing before the consent letter and certificate arrive.
- Missing the 30-day first-auditor window.
- Skipping the relative-of-director check, or assuming a relative’s shareholding is irrelevant when the ₹1 lakh face-value cap applies only to relatives.
- Entering ADT-1 tenure dates that do not match later filings.
- Ignoring rotation after a private company crosses ₹50 crore paid-up capital, or skipping special notice when replacing a retiring auditor.
What Penalties Apply, and what Should the File Hold?
Breaking the auditor rules in Sections 139 to 146, including not appointing an auditor at all, attracts Section 147(1). Imprisonment has been removed for this offence since 21 December 2020 under the Companies (Amendment) Act, 2020.
Who is penalised | Fine under Section 147(1) |
The company | ₹25,000 to ₹5,00,000 |
Each officer in default | ₹10,000 to ₹1,00,000 |
These fines are far more than the cost of appointing an auditor on time, so the 30-day deadline belongs on your incorporation checklist.
Keep one file for each auditor, holding:
- The dated Section 141 checklist
- The consent letter and eligibility certificate
- The resolutions
- The ADT-1 acknowledgement
- The engagement letter
- The date the auditor’s term ends
Conclusion on Auditor Appointment Procedure
Each step has a fixed date: check eligibility early, collect the consent letter and certificate, and file ADT-1 on time. Watch the 2026 Bill, but follow the law as it stands today. For queries on how these provisions apply to a specific company, readers may reach the firm through the contact page.
Understand Your Company's Auditor Appointment Requirements
FAQs on the Auditor Appointment Procedure
Can the same auditor be reappointed?
Yes, unless rotation applies. Then an individual can serve one five-year term and a firm two, followed by a five-year cooling-off period.
Is the auditor’s consent needed before appointment?
Yes. The proviso to Section 139(1) requires written consent and the Section 141 eligibility certificate first.
Is Form ADT-1 mandatory for the first auditor?
The rules and the revised form differ, and ICSI has asked MCA to clarify. Filing is the safer course.
What is the late fee for Form ADT-1?
One time the normal fee up to 15 days of delay, then 2, 4, 6 and 10 times at 30, 60, 90 and 180 days, and 12 times beyond that.
What if the first auditor is not appointed within 30 days?
The Board informs members, who appoint at an EGM within 90 days.
Is statutory audit mandatory for small private companies in 2026?
Yes. The 2026 Bill will only be able to exempt once enacted and notified. It is not yet law.
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