Question

The statutory auditor of a company is appointed by

• A. the Managing Director of the company
• B. the Board of Directors of the company
• C. the Shareholders in the annual general meeting
• D. the Company Law Board

Hint:

Separate the rule for the very first auditor from the rule for every later, regular auditor.

Answer 1

The Correct Option is C

Step 1: Understanding the Question:
The question asks who has the authority to appoint the statutory auditor of a company under Indian company law as it stood in 2012, governed by the Companies Act, 1956.

Step 2: Key Formula or Approach:
Separate the appointment of the very first auditor of a newly formed company from the appointment of the regular, ongoing statutory auditor, since the rule differs for each.

Step 3: Detailed Explanation:
The first auditor of a company can be appointed by the Board of Directors, within 30 days of the company's registration, and this auditor holds office only until the first annual general meeting.
After that, at every annual general meeting, it is the shareholders of the company who appoint or reappoint the statutory auditor by an ordinary resolution, and the auditor then holds office from the end of that meeting until the end of the next one.
The Managing Director has no individual power to appoint the statutory auditor, and the Company Law Board only steps in for special situations like removal of an auditor before the term ends, not for the regular yearly appointment.

Step 4: Final Answer:
The statutory auditor of a company is appointed by the shareholders in the annual general meeting.