Appointment of Auditors
Section 139 governs how company auditors are appointed and rotated: first auditor by the Board within 30 days, subsequent auditors at the AGM for five-year terms, with mandatory rotation for listed and prescribed classes of companies.
The provision, in plain terms
Every company shall appoint an individual or firm as auditor at its first AGM, to hold office from that AGM until the conclusion of the sixth AGM (a five-year term). The first auditor is appointed by the Board within 30 days of incorporation (failing which, by members in EGM within 90 days). Listed and prescribed companies cannot appoint an individual auditor for more than one term of five consecutive years, or an audit firm for more than two terms of five consecutive years, followed by a five-year cooling-off period.
Points worth memorising
- First auditor: Board within 30 days of incorporation; members within 90 days on Board's failure; holds office till conclusion of first AGM.
- Subsequent appointment: five-year term at the AGM (ratification requirement was omitted in 2017).
- Rotation (listed/prescribed companies): individual — one 5-year term; firm — two 5-year terms; then 5-year cooling off.
- Casual vacancy: filled by the Board within 30 days; if caused by resignation, also approved by members within three months.
- Government company auditors are appointed by the CAG within prescribed timelines.
How the exam tests it
Among the most-tested sections in CA Intermediate Law and Audit papers: timelines (30/90 days), rotation arithmetic, and casual-vacancy procedure are recurring MCQ and short-answer material.
Tested at: intermediate · final
Related sections
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Talk to usWhich companies are subject to auditor rotation?
Listed companies and prescribed classes — unlisted public companies with paid-up capital ≥ ₹10 crore, private companies with paid-up capital ≥ ₹50 crore, and companies with public borrowings/deposits ≥ ₹50 crore (excluding OPCs and small companies).
How is a casual vacancy in the auditor's office filled?
By the Board within 30 days. If the vacancy arises from the auditor's resignation, the Board's appointment must also be approved by members at a general meeting within three months.