Introduction:
An auditor is a person who is allowed to examine and verify financial documents for accuracy and to guarantee that businesses follow tax rules. They guard firms against fraud, point out inconsistencies in accounting methods, and, on occasion, operate as consultants, assisting businesses in identifying ways to improve operational efficiency. Auditors operate in a variety of positions in a variety of industries.
All appointments and resignations of auditors must be filed with the Registrar of Companies.
According to the terms of the Companies Act, 2013 (“Act”), each company must employ an auditor to manage its books of accounts. The company’s audit reports, which are generated by an auditor, are important papers. As a result, at its first Annual General Meeting, the firm must appoint an auditor.
Any individual or corporation can be appointed as an auditor by a company. Such an appointment requires the auditor’s written authorization. The company must notify the Registrar of Companies, or ROC (“Registrar”), of the employment of an auditor within fifteen days of the appointment.
Resignation is one way for an auditor to depart the organization. If the auditor no longer wishes to work for the company for any reason, he may submit a letter of resignation to the company. The Companies Act of 2013 and the Companies (Audit and Auditors) Norms of 2014 (the “Rules”) set down the rules and processes that an auditor must follow when resigning from a firm.
Within 30 days of resignation, the auditor must file Form ADT-3 to resign from the company as an auditor. Section 140(2) of the Companies Act, 2013 and Rule 8 of the Companies (Audit and Auditors) Rules, 2014, which are reprinted for your convenience, necessitate the filing of E Form ADT-3.
Only a special decision of the firm, after obtaining prior agreement from the Central Government, can remove the auditor appointed under section 139 before the end of his tenure in the specified method:
- Provided, however, that the auditor concerned shall be given a reasonable opportunity to be heard before any action under this subsection is taken.
- If the Central Government does not communicate its decision to a Specified IFSC public company within sixty days of the date of submission of the application under this subsection, it is assumed that the Central Government has approved the application, and the company will appoint a new auditor at a general meeting.
- If the Central Government does not communicate its decision to a Specified IFSC private company within sixty days of the date of submission of the application under this sub-section, it will be assumed that the Central Government has approved the application, and the company will appoint a new auditor at a general meeting.
Under the Companies Act of 2013, an Auditor may resign
The auditor of a government corporation or a company owned by the government will file a statement with the Comptroller and Auditor-General of India. In the statement, the auditor must disclose his reasons for resigning as well as any other pertinent facts. It is critical that the auditor notifies the Registrar of his resignation. If the auditor fails to do so, he or she will be fined.
If the auditor fails to file his statement of resignation, he would be fined Rs 50,000 or the equivalent of his compensation, whichever is less. If the auditor continues to fail, he or she will be subject to an additional penalty of 500 rupees every day of continued failure, up to a maximum of five lakh rupees.
In accordance with Section 140(2) of the Companies Act of 2013
- The auditor who has resigned from the company must file a statement in the specified form with the company and the Registrar within thirty days of the date of resignation.
- In the case of firms referred to in sub-section (5) of section 139, the auditor must also file a statement with the Comptroller and Auditor-General of India, describing the reasons and any relevant information.
In accordance with Rule 8 of the Companies Act of 2013
When an auditor resigns from the company, he must file a statement in Form ADT-3 with the company for the purposes of subsection (2) of section 140.
- The auditor’s unwillingness to be reappointed;
- Inability to complete duties due to preoccupation.
- auditor’s health
- Client dispute
- Inability to continue audit owing to exceeding the number of audits limit, etc.
Application for Resignation
In the Rules, the auditor must file an application or a statement of resignation informing his resignation. After leaving the firm, an auditor is required by the Rules to file Form ADT-3 with the Registrar.
Form ADT-3 can be filled out and given or mailed to the Registrar, or it can be completed online at the Ministry of Corporate Affairs (“MCA”) website. Following the auditor’s resignation and submission of Form AGT-3 to the company, a board meeting with all of the directors will be held to affect the resignation. According to the agreement, the corporation must select a new auditor to replace the vacancy left by the resigning auditor.
In the meanwhile, the firm can appoint a temporary auditor to fill a vacancy in a general meeting within three months, and that auditor will serve until the following annual general meeting. The corporation will pick a new auditor at the next annual general meeting following the resignation of the auditor.
e-Form for Resignation
A resigning auditor must file a statement in Form ADT-3 with the registrar within 30 days of his or her resignation date. The Companies Act of 2013 mandated the use of this E-Form.
Contents of Application (ADT-3)
The retiring auditor must fill out the following information on Form ADT – 3:
- The company’s Corporate Identification Number;
- The company’s name, registered address, and email address.
- Whether the auditor is a sole proprietorship or a corporation
- The auditor’s/income auditor’s firm’s tax PAN
- The auditor’s/membership auditor’s firm’s number
- The auditor’s/address, auditor’s firm’s city, state, pin code, and email address
- The reasons for the resignation, as well as any other pertinent data.
- Other relevant facts regarding the resignation can include anything that the company and the ROC need to know about the resignation.
- Because this is a declaration by the auditor, it must be signed exclusively by the auditor.
The auditor must sign the form with his digital signature. The auditor must attach the resignation letter, if any, to this form.
Resignation of an Auditor: A Step-by-Step Procedure
The procedure for resigning as an auditor must be followed in the order listed below. Any errors in the process can be avoided by carefully following the steps listed below:
- To begin, the auditor must send his or her resignation letter as well as Form ADT3 to the company.
- A board of directors meeting with all of the directors will be called to effect the resignation.
- Under Sections 139 and 141 of the Companies Act 2013, the company must acquire an approval letter from the new auditing firm.
- A meeting board will be convened. For the purpose of filling the vacancy of the auditor, the entire membership of the company will be summoned to a meeting.
- In such a meeting, the suggested Auditor/Auditors’ Firm will be appointed.
- Notify the Appointed Auditors/Auditors’ Firm of the appointment date.
- Submit the ADT-1 form for the new auditor’s appointment.
After an auditor resigns, a corporation must follow the specified formalities/procedures for selecting a new auditor.
Fees for the Application (ADT-3)
At the time of filing the form, the auditor must pay the stipulated fee along with Form ADT-3. The fee is determined by the share capital of the resigning auditor’s company.
The filing fee for ADT-3 is determined by the Company’s nominal share capital:
| Nominal Share Capital is Rs. | Fee for ADT-3 |
| Less than Rs. 1,00,000/- | 200/- |
| 1,00,000/- to Rs. 4,99,999/- | 300/- |
| 5,00,000/- to 24,99,999/- | 400/- |
| 25,00,000/- to 99,99,999/- | 500/- |
| 1,00,00,000 & above | 600/- |
In the event of a delay, the following fees will be charged:
| Period of Delay | Additional fee |
| Upto 30 days | 2 times of normal fees |
| 30-60 days | 4 times of normal fees |
| 60-90 days | 6 times of normal fees |
| 90-180 days | 10 times of normal fees |
| exceeding 180 days detain | 12 times of normal fees |
What is a casual vacancy at the auditor’s office?
The word “casual vacancy” is not specified in the Companies Act of 2013, although there are several indirect references that come within this category, such as:
- Auditor’s resignation
- Is disqualified from being appointed as an auditor under the Companies Act of 2013.
Conclusion
The Companies Act of 2013, for example, contains a separate section for auditors that covers all rules, emphasizing that an auditor plays an essential role in a business. The auditor is in charge of verifying the financial accuracy of the organization. However Many times, an auditor wishes to leave the company for various reasons, resulting in a vacancy in the auditor’s position.
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