Auditor Resignation: Due to lack of adequate information on the company's businesses, revenues, tax observations, non-cooperation from the management, health concerns, pre-occupation and mutual exit, the resignation of auditor is filed with ROC.

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Auditor Resignation

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.

Resignation of Auditor:

The auditor so appointed may resign due the following reasons:

  • lack of adequate information on the company's businesses, revenues, tax observations
  • non-cooperation from the management
  • health concerns
  • pre-occupation
  • Mutual exit

Documents required for resignatoin of an Auditor:

The following documents are required for resignation of an auditor.

  • Resignation letter from an auditor

Auditor resignation process - Section 140(2) and 140(3):

The auditor who has resigned from the company shall file a statement in Form ADT-3 indicating the reasons and other facts as may be relevant with regard to his resignation as follows:

  • (i) In case of other than Government Company, the auditor shall within 30 days from the date of resignation, file such statement to the company and the registrar.
  • (ii) In case of Government Company or Government controlled company, auditor shall within 30 days from the resignation, file such statement to the company and the Registrar and also file the statement with the Comptroller and Auditor General of India (CAG)..

Penalties:

The onus to file such statement containing relevant facts and reasons for resignation is on the resigning auditor and any contravention of Section 140(2) he or it shall be liable to a penalty of fifty thousand rupees or an amount equal to the remuneration of the auditor, whichever is less, and in case of continuing failure, with further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of five lakh rupees.

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 resignation of an auditor?

Yes. The auditor has to file form ADT-3 with in 30 days of resignation with the Registrar of Companies, MCA.

How much time taken to appoint an auditor?

With in 10 minutes, you can file resignation as auditor.

What is the government fee for auditor resignation?

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

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