Statutory Auditor explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Every company in India must have its accounts audited. Every one. Regardless of turnover, activity or size.
There is no small-company audit exemption, and that single fact is the biggest recurring cost difference between a private limited company and an LLP. If you're weighing the two structures, price the audit in.
Section 139 governs who does it, how they're appointed, and for how long.
Board appoints the first auditor within 30 days of registration. At the first AGM, members appoint for a five-year block — and annual ratification was abolished in 2017, so stop passing that resolution. ADT-1 within 15 days, filed by the company. Rotation doesn't touch a private company below ₹50 crore capital or borrowings.
The first auditor
The Board appoints within thirty days of registration.
If the Board doesn't, it must inform the members, who then appoint at an EGM within ninety days.
The first auditor holds office until the conclusion of the first AGM.
(For a Government company the CAG appoints within sixty days, failing which the Board within thirty more, failing which the members within a further sixty.)
Is ADT-1 required for the first auditor? Technically, Rule 4(2) ties the filing to an appointment under Section 139(1), and the first auditor is appointed under Section 139(6). So a strict reading says no. File it anyway — the fee is nominal and it removes the argument entirely.
The five-year appointment
At the first AGM, members appoint an individual or firm to hold office from the conclusion of that meeting until the conclusion of the sixth AGM — and thereafter at every sixth meeting.
Two things follow:
- The appointment is for a block of five years, not one.
- Annual ratification has been abolished. The proviso to Section 139(1) requiring ratification at every AGM was omitted by the Companies (Amendment) Act, 2017. A great many AGM notice templates still carry a ratification item. It's redundant — drop it.
Before appointing, you must obtain:
- the auditor's written consent; and
- the auditor's certificate under Rule 4(1) stating that they are eligible and not disqualified under Section 141 and the Chartered Accountants Act; that the appointment is as per the term provided under the Act; that it is within the prescribed limits; and that the disclosed list of pending proceedings on professional conduct is true and correct.
Filing ADT-1
| Form | ADT-1 |
| Due | 15 days from the meeting at which the auditor is appointed |
| Filed by | The company — not the auditor |
| Attach | Board or members' resolution; the auditor's written consent; the Rule 4(1) certificate; the company's intimation letter to the auditor |
| Fee | Normal fee on the nominal-capital slab, plus additional fee on the standard delay slabs |
Fifteen days is short. Line the consent and certificate up before the AGM, not after.
Does rotation apply to you?
Mandatory rotation under Section 139(2) — one term of five years for an individual, two terms for a firm — applies to listed companies and prescribed classes.
Rule 5 prescribes:
- unlisted public companies with paid-up capital of ₹10 crore or more;
- private companies with paid-up capital of ₹50 crore or more;
- any company below those thresholds but with public borrowings from banks or financial institutions, or public deposits, of ₹50 crore or more.
So a private company is outside mandatory rotation unless its paid-up capital is ₹50 crore or more, or its borrowings or deposits hit ₹50 crore.
For companies inside Rule 5, there's a five-year cooling-off before the same individual or firm can come back — and firms with common partners with the outgoing firm are barred during that period too.
Section 139(3) also lets members voluntarily resolve to rotate the audit partner and team, or to appoint joint auditors. Rarely used in private companies, but available.
Casual vacancy
A casual vacancy arises from death, disqualification or resignation — not from a term expiring.
The Board fills it within thirty days.
But where the vacancy arises from a resignation, the Board's appointment must also be approved by members at a general meeting within three months of the Board's recommendation.
The auditor so appointed holds office until the conclusion of the next AGM.
When an auditor resigns
The auditor — not the company — must file a statement in Form ADT-3 with both the company and the Registrar within thirty days of resignation, setting out the reasons and other relevant facts.
Penalty on the auditor for not filing: ₹50,000 or the auditor's remuneration, whichever is less, plus ₹500 a day for continuing failure, capped at ₹5,00,000.
Removing an auditor mid-term
This is deliberately hard.
An auditor can be removed before the expiry of the term only by special resolution, after obtaining prior Central Government approval — and the auditor must be given a reasonable opportunity of being heard.
The sequence:
- Board resolution for removal.
- Application to the Central Government (delegated to the Regional Director) in Form ADT-2, within thirty days of that Board resolution.
- On approval, convene a general meeting within sixty days and pass a special resolution.
- The auditor is heard before any action is taken.
In practice, a mid-term change of auditor is almost always effected by resignation, not removal. That's not a coincidence.
Who can be your auditor
Only a chartered accountant. Where a firm — including an LLP — is appointed, only the partners who are chartered accountants may act and sign.
Disqualified under Section 141(3): a body corporate other than an LLP; an officer or employee of the company; a partner or employee of such an officer or employee; a person who (with relatives or partners) holds securities or an interest in the company or its group (a relative may hold face value up to ₹1,00,000), or is indebted above ₹5,00,000, or has guaranteed third-party debt of the company above ₹1,00,000; a person with a prescribed business relationship with the group; a person whose relative is a director or KMP of the company; a person in full-time employment elsewhere, or holding audits of more than twenty companies; a person convicted of fraud within the last ten years; and a person whose associated entity provides Section 144 prohibited services to the company.
One relaxation worth knowing. The exemption notification modifies Section 141(3)(g) so that, in counting the twenty-company ceiling, private companies with paid-up capital below ₹100 crore are excluded. That substantially widens the pool of auditors available to small private companies — useful when your preferred CA says they're at their limit.
The whole thing on one page
| Event | Action | Timeline | Form |
|---|---|---|---|
| Incorporation | Board appoints first auditor | 30 days | ADT-1 (in practice) |
| Board fails to appoint | Members appoint at EGM | 90 days | ADT-1 |
| First AGM | Members appoint for 5 years | At the AGM | ADT-1 in 15 days |
| Every sixth AGM | Reappointment or new appointment | At the AGM | ADT-1 in 15 days |
| Casual vacancy (death/disqualification) | Board fills | 30 days | ADT-1 |
| Casual vacancy (resignation) | Board fills, members approve | Board 30 days; EGM 3 months | ADT-1 |
| Auditor resigns | Auditor files statement | 30 days | ADT-3 |
| Removal mid-term | CG approval, then special resolution | ADT-2 in 30 days; EGM in 60 days of approval | ADT-2, MGT-14 |
Key takeaways
- There is no audit exemption, at any size.
- First auditor within 30 days of registration, by the Board.
- Five-year block at the first AGM — and no annual ratification.
- ADT-1 within 15 days, by the company, with consent and certificate attached.
- Rotation only bites at ₹50 crore capital or borrowings for a private company.
- ADT-3 is the auditor's filing, not yours.
- Removal needs Central Government approval. Resignation is the practical route.
- Small private companies don't count towards the twenty-audit ceiling.
Read next
- Post-Incorporation Compliance: The First 180 Days
- Annual Compliance Calendar for Private Companies
- Form AOC-4: Filing Financial Statements
- Internal Audit and Secretarial Audit Thresholds
Disclaimer: Positions stated as on 4 September 2026. Rule 5 thresholds and Section 141 disqualifications are amended periodically — take professional advice before an appointment, removal or resignation.