The Companies Act, 2013 has separate section for auditor related all the provisions, implying that an auditor has important place in a company. Auditor is per responsible for checking the accuracy financial part of company.
I have already covered the provision of appointment of auditor in my article https://taxguru.in/company-law/auditor-appointment-companies-act-2013.html.
Many times, due to some reason, auditor wants to resign from the company arising vacancy in the place of office of auditor. Let’s us discuss the provision related to resignation of auditor arising out of casual vacancy.
Who is an Auditor?
An auditor is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping organizations to spot ways to boost operational efficiency. Auditors work in various capacities within different industries.
Auditor appointment and resignation all are to be served to Registrar of Companies.
Who are eligible to be auditor of the company?
As per section 141 of the Companies act, 2013 A person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant.
Provided that a firm whereof majority of partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a company.
Where a firm including a limited liability, partnership is appointed as an auditor of a company, only the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm.
What is maximum numbers of years as auditor can be appointed in a company?
Auditor can be appointed for maximum five (5) years in one term. However, they can be reappointed again in Annual General Meeting. However below given companies cannot appoint as follows: –
(a) an individual as auditor for more than one term of five consecutive years; and
(b) an audit firm as auditor for more than two terms of five consecutive years:
And such companies are: –
1. listed company
2. all unlisted public companies having paid up share capital of rupees ten crore or more
3. all private limited companies having paid up share capital of rupees fifty crore or more
4. all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more
What is casual vacancy of office of auditor?
The term casual vacancy is not defined under The Companies Act, 2013, though there are some indirect reference which fall under casual vacancy like:-
- Resignation by auditor
- Incurs disqualification to be appointed as auditor as given under The Companies Act, 2013.
What if an auditor wants to resign from the company?
Yes, there are situation when an auditor wants to resign from the company. They can resign after giving the notice to company fulfilling all the conditions as covered under their terms of appointment letter at the time of their appointment.
How to appoint an auditor if casual vacancy arises in the office of auditor?
The procedure to appoint new auditor for filling up the vacancy arose by casual vacancy is as follows:-
1. Submission of resignation letter by auditor to the management of company.
2. Fixing of Board Meeting within thirty (30) days for approving the resignation of auditor and appointing a new auditor for filing the casual vacancy till the next annual general meeting.
3. Holding of Board Meeting taking note of:-
4. Resignation of Auditor
5. Appointment of new auditor to hold office till the conclusion of the next annual general meeting and approving the new auditor appointment in general meeting which should be held within three months from the Board Meeting.
- Fixing of General Meeting for approving the new auditor appointment from members of company.
1. Filing of E-form ADT-3 by auditor for his resignation from the company within thirty (3) days from the date of his resignation.
2. Convening of General Meeting and passing of ordinary resolution for auditor appointment recommended by Board of Company.
3. Filing of MGT-14 for ordinary resolution passed in General Meeting within fifteen (15) days.
4. Filing of E-form ADT-1 within fifteen (15) days from appointment in General Meeting.
5. Maintaining minutes and other statutory books and registers.
Note:- (Generally, MGT-14 is filled within thirty (30) days but as ADT-1 cannot be filled within without the SRN of MGT-14 in case of casual vacancy, MGT-14 has to be filled within 15 days.)
What are the E-forms involved in resignation of auditor and appointment of new auditor in his term?
There are only three (3) forms involved in this case and these are: –
- E-form MGT-14
- E-form ADT-1
- E-form ADT-3
What is company fails to appoint auditor of company within prescribed time?
As per section 147 of The Companies Act, 2013, following the penal action to be taken by department: –
1. the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees, or with both.
2. If an auditor of a company contravenes any of the provisions the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees or four times the remuneration of the auditor, whichever is less.
The above article is prepared keeping in mind all the important and basic question as well as provision of Chapter X Audit and Auditors of the Companies Act, 2013. The author has tried to cover all the important and basic question. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.
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(My name is Tripti Shakya, Practicing Company Secretary at M/s Tripti Shakya and Company, and is Corporate Consultant and provides varied array of services including Start-ups mentor, Secretarial, Legal, Trademark, taxation, Audit, GST, Book keeping and other ancillary advisory service in Delhi, Chandigarh as well as The National Capital Region (NCR) and can contact me through email id:- [email protected] and Contact Number: 91-8178515005)
Author Bio
within how many days, a private company having turnover > 200 cr need to appoint internal auditor in case of vacancy by resignation.