Removal of an Auditor: The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, after obtaining the previous approval of the Central Government in that behalf.

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Auditor Removal

Who is an Auditor:

An Auditor is an independent person/firm who is engaged to do audit, review and verify the accuracy of financial records and to express an opinion on whether or not the company's financial statements are free from any material misstatements due to fraud or error.

Every company has to appoint an auditor irrespective of business size. The company has to appoint an auditor even if they do not have any transactions.

Eligibility, Qualifications and Disqualification of Auditors:

Qualification:

Individual: A person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant.

Firm: A firm whereof majority of partners are Chartered Accountant and practicing in India may be appointed by its firm name to be auditor of a company. However, the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm.

Eligibility:

The following persons shall not be eligible for appointment as an auditor of a company, namely:

  • (a) a body corporate other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008;

  • (b) an officer or employee of the company;

  • (c) a person who is a partner, or who is in the employment, of an officer or employee of the company;

  • (d) a person who, or his relative or partner:

    (i) is holding any security of or interest in the company or its subsidiary, or of its holding or associate company or a subsidiary of such holding company:

    Provided that the relative may hold security or interest in the company of face value not exceeding one thousand rupees or such sum as may be prescribed;

    (ii) is indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of such amount as may be prescribed; or

    (iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, for such amount as may be prescribed;

  • (e) a person or a firm who, whether directly or indirectly, has business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company of such nature as may be prescribed;

  • (f) a person whose relative is a director or is in the employment of the company as a director or key managerial personnel;

  • (g) a person who is in full time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding appointment as auditor of more than twenty companies.

  • (h) a person who has been convicted by a court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction;

  • (i) a person who, directly or indirectly, renders any service referred to in section 144 to the company or its holding company or its subsidiary company.

Disqualification:

Where a person appointed as an auditor of a company incurs any of the disqualifications mentioned as above after his appointment, he shall vacate his office as such auditor and such vacation shall be deemed to be a casual vacancy in the office of the auditor.

Removal of an Auditor:

The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, after obtaining the previous approval of the Central Government in that behalf:

Section 140(1) and Rule 7of the Companies (Audit and Auditors) Rules, 2014:

The auditor appointed under Section 139 of the Companies Act, 2013 may be removed from his office before the expiry of the term only by:

  • Obtaining the prior approval of the Central Government by filling an application in form ADT-2 within 30 days of resolution passed by the Board.
  • The company shall hold the general meeting within sixty days of receipt of approval of the Central Government for passing the special resolution.
  • The auditor concerned shall be given a reasonable opportunity of being heard.

Documents required for removal of an Auditor:

The following documents are required for removal of an auditor.

  • Board Resolution for removal of an auditor
  • Cental Government (Power delegated to Regional Director) Approval Letter
  • Members Resolution

Auditor removal process:

The following process involved in removal of an auditor:

  • (a) Pass the Board Resolution for removal of an auditor before expiry of his term.
  • (b) File Form ADT-2 with MCA for Regional Director approval and get the Regional Direcctor (RD) approval.
  • (c) Pass the Members Resolution for removal of existing auditor.
  • (d) Send a letter containing the grounds of removal to an exiging auditor of the company.

Let's Clear Your Doubts


Who is an Auditor?

An Auditor is an independent person/firm who is engaged to do audit, review and verify the accuracy of financial records and to express an opinion on whether or not the company's financial statements are free from any material misstatements due to fraud or error.

Who is First Auditor?

The first auditor is the auditor appointed by the board of director or company with in 30 days or 90 days respectively from the date of incorporation.

Is Auditor appointment mandatory in a Company?

Yes. Every company has to appoint an auditor irrespective of business size. The company has to appoint an auditor even if they do not have any transactions.

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Is Auditor appointment mandatory for LLP?

No. If the turnover of LLP exceeds Rs. 40 lakhs in a year or the capital contribution exceeds Rs. 25 lakhs, then auditor appointment is mandatory in LLP.

Do we need to file any document for the remova of an auditor?

Yes. You need to file Form ADT-2 with in 15 days of appointment with the Registrar of Companies, MCA.

How much time taken to remove an auditor?

With in 30 days, you can remove an auditor.

What is the government fee for removal of an auditor?

It depends on the company's authorised share capital. For one lakh authorised share capital company, the auditor removal fee is Rs. 300/-.

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