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What is the implication if an auditor resigns from his office prior to completion of his term? Will it be considered as an appointment of auditor in case of casual vacancy

Contributed by: Venkat Sai Reddy Gopavarapu
Email id: Venkat@simplybiz.in

According to the Indian Companies Act,2013 (Act) every company must get its Financial Statements audited by an auditor. In view of this, every Company shall appoint an individual or a firm as an Auditor at its first Annual General Meeting (AGM) who shall continue until the conclusion of every 6th AGM

  • Appointment of First Auditor: As per the provisions of Section 139(6) Act the first auditor of a company, other than a Government company, shall be appointed by the Board of Directorswithin thirty days from the date of registration of the company and such auditor shall hold office till the conclusion of the first Annual General Meeting.
  • Appointment of Subsequent Auditor: As per the provisions of Section 139(1) of the Act, every company shall, at the first Annual General Meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting.

 

However, there are some instances wherein auditor resigns from his office prior to completion of his term. This may arise due to the death, resignation, and disqualification of auditor. This is referred as a casual vacancy in the office of an auditor. In such instances, the Board of Directors of the Company has to take the necessary steps as mentioned in the Act to fill such vacancy.

Steps to be followed to fill the casual vacancy in the office of the auditor.

  1. The Company shall after receipt of the notice of resignation from the existing auditor conduct a Board meeting and take note the resignation of the auditor. Thereafter, Form ADT-3 shall be filed by the resigning auditor within 30 days from the date of resignation.
  2. The Board of directors shall fill the vacancy by recommending a new auditor within 30 days of the vacancy occurrence and obtain his/her consent letter along with certificate from the new auditor to act as auditor of the company.
  3. If the vacancy is a result of an auditor’s resignation, the Board’s appointment of a new auditor must be approved by the members in a general meeting within 3 months from the date of Board’s recommendation
  4. Thereafter, the company must intimate appointment of the auditor to ROC within 15 days from the date of the general meeting by filing Form ADT-1.
  5. The newly appointed auditor shall hold the office till the conclusion of the upcoming Annual General Meeting (AGM)
  6. Thereafter, in the upcoming AGM, the Company shall recommend appointment of a auditor for a term of 5 years

Considering the importance of the role of the auditor, the appointment of an auditor in case of Casual Vacancy must be filled as per the above process.

If you are looking for compliance support, we can help you with the same. SimplyCorpis a solution that offers comprehensive and end-end management of Corporate Governance & Secretarial Compliances covering all stages of entity life cycle. If want to know more on the compliance requirements and outsource the same to us, please write to our Product Head – Vaishali Vohra at the mail vaishali@simplybiz.in or SimplyCorp@simplyBiz.in.

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