The board of directors shall appoint first auditor of a company

 Options:

a) With in one month of completion of capital subscription state of the company b) With in one month of the promotion of the company c) With in one month of the commencement of the business of the company d) With in one month of incorporation of the company

The Correct Answer Is:

d) With in one month of incorporation of the company

Correct Answer Explanation: d) With in one month of incorporation of the company

The correct answer to the question is d) Within one month of incorporation of the company. This answer aligns with the legal and procedural requirements for the appointment of the first auditor in a company.

When a company is incorporated, it marks the official formation of the company as a legal entity. According to most corporate regulations and laws, the appointment of the first auditor is a critical step that needs to be completed within a specific timeframe following the incorporation.

Let’s delve into the reasons why the other options are not the correct timeframe for appointing the first auditor:

a) Within one month of completion of capital subscription state of the company:

This option refers to the completion of the capital subscription state of the company. However, the completion of capital subscription might not necessarily coincide with the legal incorporation of the company.

It is plausible that capital subscription concludes after the incorporation, and hence waiting until this stage might cause a delay in appointing the auditor, which goes against regulatory timelines.

b) Within one month of the promotion of the company:

The promotion of the company doesn’t indicate a specific legal milestone in its formation. Promotion typically refers to advertising or marketing efforts to promote the company’s products or services.

This stage is not directly tied to the legal establishment or incorporation of the company, making it an inappropriate benchmark for appointing the first auditor.

c) Within one month of the commencement of the business of the company:

Commencement of business occurs after the incorporation of the company, but it might not be a standardized or precise indicator across all jurisdictions for the timing of auditor appointment.

Waiting until the commencement of business could potentially delay the crucial process of appointing an auditor, especially considering that the company might be engaged in business activities months after incorporation.

The appointment of the first auditor within one month of incorporation ensures that the company adheres to regulatory compliance right from its inception. Auditors play a critical role in examining and validating a company’s financial records, ensuring transparency and accuracy in reporting, which is crucial for stakeholders, investors, and regulatory bodies.

Prompt appointment of an auditor after incorporation also reflects the company’s commitment to good governance and financial transparency. It establishes a foundation for sound financial practices from the outset, thereby building confidence among shareholders, investors, and other stakeholders.

In conclusion, the appointment of the first auditor within one month of incorporation is the correct timeline as it aligns with legal and regulatory requirements, ensures timely initiation of financial oversight, and sets the stage for responsible financial management and transparency in the company’s operations.

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