The Companies Act, 1956 stipulates the office of auditor in a company as a continuing one; therefore, it has laid down that an auditor shall hold office from the conclusion of the annual general meeting in which he is appointed till the conclusion of the next annual general meeting. Excepting cases of appointment of the first auditor, appointment or filling of casual vacancies in the office of the auditor, companies are required to appoint an auditor or auditors in the annual general meeting as a routine feature. A specific resolution is required to re-appoint the auditors. The retiring auditor cannot be deemed to be re-appointed automatically at the annual general meeting. Till a formal resolution is passed, a retiring auditor cannot be said to have been re-appointed as contemplated by the section. It is not correct to say that in the absence of a resolution to the effect that the retiring auditors shall not be re-appointed, the retiring auditors shall stand re-appointed as auditors of the company. This appointment is subject to the following conditions :
- The auditor proposed to be appointed or re-appointed must possess the qualification prescribed under section 226.
- The proposed auditor does not suffer from the disqualifications enumerated in sub-sections (3) and (4) of section 226.
- In the case of proposed re-appointment of the retiring auditor, it should be ensured that:
- he has not given to the company notice in writing of his unwillingness to be reappointed;
- no resolution has been passed at the annual general meeting appointing somebody else instead of the retiring auditor or providing expressly that the retiring auditor shall not be reappointed;
- no notice of the intended resolution to appoint some other person or persons in place of the retiring auditor was received by the company that could not be proceeded with due to death, incapacity or disqualification of the other person or persons [Section 224(2)].
- A written certificate has been obtained from the proposed auditor to the effect that the appointment or re-appointment, if made, will be in accordance within the limits specified in subsection (1B) of section 224.