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In the day-to-day operation of a firm, financial transactions take place and these are recorded by the company accountant. There are risks involved in this transaction process and it is necessary to audit the accounts periodically. This is why the appointment of auditor is crucial for the company.
The Company Act demands that a non-government company must appoint the first auditor within 30 days of its registration date. The BOD of the firm recommends the auditor and members of the company choose them at an EGM. Similarly, if the company is a listed or specified type of firm, then it must fill any casual vacancy in the auditor position within thirty days.
For a government company, the procedure for appointment is different. CAG will appoint the first auditor of a government company within 60 days of its registration. If the CAG fails to appoint the auditor then they will inform members of the company and the members can select the first auditor of the company within 60 days after receiving the information at an EGM.
In case the auditor of a company resigns then it is advisable that the firm accepts their resignation by passing a resolution. The resolution must include a statement that the company accepts their resignation and that they will be looking for a new auditor. It is also advisable that the firm must hold a board meeting and discuss the reasons behind the resignation of the auditor.
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