Appointment of First Auditor- A Complete Guide

The appointment of auditors is a crucial part of corporate governance, ensuring financial transparency and accountability. With the recent MCA amendment, all companies must file Form ADT-1 with the ROC for the appointment of the first auditor, effective from July 14, 2025. This new rule ensures better monitoring, transparency, and accountability in the auditing process.

This blog explains the old and new rules, highlights key changes, provides a step-by-step filing guide, and FAQs.

Table of Contents

What is an Auditor?

An auditor is a professional responsible for examining a company’s financial records, verifying compliance with accounting standards, and providing an independent opinion on the accuracy and fairness of financial statements.

Key functions of an auditor:

Verification of books of accounts and financial statements
Ensuring compliance with laws and regulations
Reporting irregularities or fraud
Maintaining independence and objectivity

Appointment of Auditors under Companies Act, 2013

First Auditor

Non-Government Companies: The Board of Directors appoints the first auditor within 30 days of incorporation. If the Board fails, members appoint the auditor at an EGM within 90 days.
Government Companies: The CAG appoints the first auditor within 60 days. If CAG fails, the Board must appoint within 30 days.

Subsequent Auditor

Appointed by the members at the AGM.
Holds office until the conclusion of the 6th AGM from the date of appointment.

Casual Vacancy

Filled by the Board within 30 days.
If the vacancy is due to resignation, members approve at an EGM within 3 months.

Rotation of Auditors

Individual Auditor: Maximum one term of 5 years.
Audit Firm: Maximum two terms of 5 years.
Cooling-off Period: 5 years before reappointment.

Key Changes Introduced by MCA Amendment 2025

Mandatory Filing of Form ADT-1 for first auditor appointment.

Previously, companies were not required to file Form ADT-1 for the appointment of the first auditor. The recent amendment has removed this exemption, making it mandatory for companies to file Form ADT-1 within 15 days of the first auditor’s appointment, regardless of whether the appointment is made by the Board of Directors, members at an Extraordinary General Meeting (EGM), or the Comptroller and Auditor General (CAG) in the case of government companies.

Updated Form ADT-1

The MCA has revised Form ADT-1 to include a dropdown option for the nature of the appointment. Companies are now required to select one of the following options:

First Auditor by Board of Directors
First Auditor by Members
First Auditor by CAG

This update ensures that the ROC maintains accurate records of all auditor appointments, including the first auditor.

Applicability

The amended rule applies to:

All companies incorporated on or after July 14, 2025.
Existing companies that appoint their first auditor on or after July 14, 2025.

Comparison Table: Old vs New Rules

Aspect	Old Rule (Companies Act, 2013)	New Rule (Companies Act, 2013 + MCA Amendment 2025)
First Auditor Appointment	Board appoints within 30 days; members within 90 days if Board fails	Same; mandatory filing of Form ADT-1 within 15 days of appointment
Appointment by CAG	CAG appoints within 60 days; Board appoints if fails	Same; Form ADT-1 filing mandatory
Subsequent Auditor Appointment	Members appoint at AGM; holds office till 6th AGM	Same; tenure and terms must be disclosed; ROC record maintained
Casual Vacancy	Board fills within 30 days; members approve at EGM if due to resignation	Same; stricter eligibility and due diligence required
Rotation of Auditors	Individual: 1 term of 5 years; Firm: 2 terms of 5 years; 5-year cooling-off	Same; additional disclosure and due diligence for reappointment
ROC Filing Requirements	Not required for first auditor	Mandatory filing of Form ADT-1 for first auditor and subsequent auditors
Penalties	Late fees applicable only for subsequent auditors	Penalties apply for failure to file Form ADT-1 for first auditor, including late fees and non-compliance flags

Steps to File Form ADT-1 for First Auditor Appointment

Board Meeting: Convene a Board meeting within 30 days of incorporation to appoint the first auditor.
Obtain Consent: Ensure the appointed auditor provides a written consent to act as the auditor.
Prepare Documents: Gather necessary documents, including the Board resolution and the auditor’s consent.
Access MCA Portal: Log in to the MCA V3 portal and navigate to the e-forms section.
Fill Form ADT-1: Select the appropriate nature of appointment and fill in the required details.
Attach Documents: Upload scanned copies of the Board resolution and auditor’s consent.
Submit and Pay Fees: Submit the form and pay the applicable filing fees.
Obtain SRN: Upon successful submission, an SRN (Service Request Number) will be generated as proof of filing.

Compliance Timeline

Effective Date: July 14, 2025
Filing Deadline: Within 15 days from appointment of first auditor

Consequences of Non-Compliance

Penalties: Late fees under Companies (Registration Offices and Fees) Rules, 2014
Non-Compliance Flags: Company record may be flagged
Legal Action: Persistent non-compliance may attract legal actions against the company and its officers.

Tips for Smooth Compliance

Always appoint auditors promptly after incorporation.
Maintain updated Board resolutions and auditor consents.
File Form ADT-1 online without delays.
Conduct due diligence for eligibility and independence.
Maintain a record of all filings for audits and inspections.

FAQs

Q1. Is Form ADT-1 mandatory for all companies?
Yes, for both new and existing companies appointing their first auditor on or after July 14, 2025.

Q2. What is the deadline for filing Form ADT-1?
Within 15 days from the date of appointment of the first auditor.

Q3. What if the first auditor is appointed by CAG?
The company still needs to file Form ADT-1 within 15 days of appointment.

Q4. Are there penalties for late filing?
Yes, late fees apply and persistent non-compliance may result in legal action.

Q5. Does Form ADT-1 need to be filed for subsequent auditors?
Yes, it was already required for subsequent auditors; now it includes first auditors as well.

Conclusion

The mandatory filing of Form ADT-1 for first auditor appointments ensures transparency, accountability, and compliance under the Companies Act. Companies must follow the new rules carefully to avoid penalties and maintain good corporate governance.

Proper planning, timely filing, and due diligence are essential for smooth compliance. Consulting a professional corporate legal or audit service can further ensure that the company meets all statutory requirements efficiently.