Change In Company’s Auditor (Resignation And Appointment Of Auditor)

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    Every Company requires to submit its annual report in the form of a financial statement with the registrar of Companies, which is required to be minutely checked by the auditor of the Company. To act as an Auditor, a person should be a Chartered Accountant.
    First Auditor: After Incorporation of the Company, it is required to appoint a Statutory Auditor within 30 days till the first Annual General Meeting of the Company.

    In the case of Government companies, the first auditor would be appointed by the Auditor-General of India and Comptroller within 60days from the date of registration of the company and where it fails to appoint the auditor within the said time period, the board of directors would appoint such auditor within 30days.

    The intimation of appointment of 1st auditor to the Registrar of Companies in Form ADT-1 shall be made within 15 days from such appointment.

    Statutory Auditor: Every company is required to appoint their Statutory Auditor in the first Annual General Meeting for a period of 5 years till the end of the 6th AGM of the company. Thereafter the appointment of auditors has to happen for every five years.

    The term of appointment shall be for a period of 5 years at all times meaning which a period less than 5 years cannot be chosen.

    The term of the auditor expires after the completion of 5 years then in such case the company has to re-appoint the auditors. A company can re-appoint a retiring auditor if:

    1. he is qualified for re-appointment
    2. a notice of his unwillingness to be re-appointed is not given to the company
    3. a special resolution appointing some other auditor or expressing objection on re-appointed has not been passed.

    The following companies accept OPC and Small Company shall not appoint or reappoint an individual for more than one term of five consecutive years or an auditor firm for more than two terms of five consecutive years:

    1. Listed Companies
    2. Unlisted public company having paid up share capital of rupees 10 crores or more;
    3. Private limited companies having paid up share capital of rupees 50 crores or more;
    4. Unlisted public companies and Private companies having public borrowings from financial institutions, banks or public deposits of rupees 50 crores or more.

    The individual auditor or firm can be re-appointed in the same company after their completion of term as prescribed above, only after 5 years from completion of his term. Also, an audit firm having a common partner to other audit firms, whose term has expired in a company immediately preceding the financial year cannot be appointed as an auditor of the same company for 5 years.

    Documents Required for appointment of auditor:

    1. A written consent from the Auditor, for acting in the capacity of the Auditor
    2. Notice of Appointment of auditor
    3. Board Resolution for appointment of auditor
    4. Shareholder’s resolution in case auditor appointed or re-appointed in shareholder’s meeting.
    5. Appointment letter
    6. Any other document as may be required

    Resignation of auditor

    An auditor may resign from the Company by serving Notice along with the valid reason for resignation and fulfilling all the conditions as covered under their terms of appointment letter.
    The Board of the Company shall take note of the resignation in their meeting.
    The resigning auditor shall within 30 days from the effective date of resignation, intimate Registrar of Companies about their resignation in form ADT-3.

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