legal position if the first Auditors are not appointed within the

including that a person in wholetime employment elsewhere can be appointed Auditor of specified number of companies. Also, another unintended interpretation is possible as regards an -individual chartered accountant who is not employed elsewhere On wholetime basis. There appears to be no bar to such an individual to hold any number of company audits.
Specified Number of Audits. In computing the specified number of audits, the following shall be taken into account:
(i) all company audits where a person or a firm is appointed as Joint Auditor;
(ii) audit of non-profit companies; and
(iii) companies limited by guarantee and having share capital.
The following shall however be not taken into account:
(a) Branch audits. Thus, if X & Co. are the Auditors of' A Ltd.' and its ten branches,
the assignment will be counted as only One audit. The Department of Com
pany Affairs has also endorsed this view.
(b) Guarantee companies not having share capital.
(c) Special audits, investigations and audits of corporations set up under a
separate Act.
(d) Audits of foreign companies. Foreign companies fall outside the scope of
Section 224.
(e) Audit of private companies".
The company and its Board of Directors, as the case may be, before appointing or
reappointing an Auditor must obtain a certificate from the proposed Auditor that the appointment or re-appointment, if made, will be in accordance with the limits specified in sub-section (lB) (discussed above).
Q: 20. Explain the legal position if the first Auditors are not appointed within the
stipulated time. fC.A. (Final) May, 1999]
.9Lns. Section 224 (5) lays down that the first Auditors of a company shall be ap
pointed by the Board of Directors within One month of the registration of the company. I ,
If the Board of Directors fail to appoint U; first Auditors within the aforesaid stipulated period of one month, the company in general meeting may appoint the first
Auditor or Audito~s. .. ,
Q: 21. MIs ABC Ltd. was incorporated on 3rd March, 1993 :
(i) How would the first Auditor of ABC Ltd. be appointed?
(ii) Who is disqualified to be an Auditor of ~ company?
(iii) Is it possible to appoint the first Auditor of ABC Ltd. at a general meeting? If
so, draft a specimen resolution in this regard.
.9Lns. (i) Please see answer to Q. 18 (a).
(ii) Please see answer to Q. 18 (b).
(iii) Yes, it is possible for ABC Ltd. to appoint its first Auditor in a duly convened general meeting. Section 224(5) provides that if within One month from the date of incorporation of a company, the Board of Directors of the company fails to appoint first Auditors of the company, the company may appoint first Auditor in a duly convened general meeting.