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Auditor Resignation
Auditor Resignation: The auditor’s resignation is filed with the ROC due to a lack of adequate information on the company’s businesses, revenues, tax observations, non-cooperation from the management, health concerns, pre-occupation, and mutual exit.
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Auditor Resignation
Who is an Auditor:
In order to conduct an audit, examine, and verify the correctness of a company’s financial records and to offer an opinion on whether or not the company’s financial statements are free of serious misstatements caused by fraud or error, a corporation hires an independent individual or firm called an auditor.
Regardless of business size, every organization must employ an auditor. Even if the business has no transactions, an auditor must be appointed.
Auditors' Eligibility, Qualifications, and Disqualification:
Qualification:
Individual:Â A person is only eligible for appointment as an auditing firm’s auditor if he is a certified public accountant.
Firm: A firm whose majority of partners are Chartered Accountants practicing in India may be appointed as the auditor of a company by its firm name. However, chartered accountant partners shall be authorized to act and sign on behalf of the firm.
Eligibility:
The following individuals are ineligible for appointment as a company’s auditor:
- (a) a corporation registered under the Limited Liability Partnership Act of 2008 that is not a limited liability partnership;
- (b) a corporate officer or employee;
- (c) a person who is a partner of an officer or employee of the company or who is employed by that officer or employee;
- (d) a person or his relative or spouse who:
(i) hold any security or interest in the company, its subsidiary, its holding or affiliate company, or a subsidiary of such holding company:
Provided, however, that the relative may hold securities or interests in the company with a nominal value of up to one thousand rupees or such other amount as may be prescribed;
(ii) owes more than the prescribed amount to the company, its subsidiary, its holding or associate company, or a subsidiary of the such holding company; or
(iii) has provided a guarantee or security in connection with the debt of a third party to the company, its subsidiary, its holding or associate company, or a subsidiary of the such holding company;
- (e) a person or business that is associated with the business, its subsidiary, its holding or associate company, or a subsidiary of such holding or associate firm, either directly or indirectly;
- (f) a person whose relative is director or is employed as a director or key managerial personnel by the company.
- (g) a person who is employed full-time elsewhere, or a person or partner of a firm holding an appointment as its auditor, if, at the date of such appointment or reappointment, such person or partner holds an appointment as auditor of more than twenty companies.
- (h) a person who has been convicted of a fraud-related offense by court and less than ten years have passed since the date of conviction;
- (i) a person who, directly or indirectly, performs any of the services listed in section 144 for the company, its holding company, or its subsidiary company.
Disqualification:
If a person appointed as auditor of a company incurs any of the disqualifications listed above after his appointment, he must resign from his position as auditor, and his departure will be considered a casual vacancy in the auditor’s office.
Resignation of an Auditor:
Auditor Resignation, The appointed auditor, may resign for the following reasons:
- Insufficient information regarding the company's businesses, revenues, and tax observations
- Uncooperative management raises health concerns
- pre-occupation
- Mutual exit
Documents required for an Auditor's resignation:
The following documents are required for an auditor’s resignation.
- Auditor's letter of resignation
Process for auditor resignation - Sections 140(2) and 140(3):
The auditor who has left the company is required to provide a statement on Form ADT-3 outlining his resignation’s circumstances as well as any other relevant information.
- If the company is not a government entity, the auditor must file this statement with the company and the registrar within thirty days of resigning.
- (ii) In the case of a Government Company or a Government-controlled company, the auditor must submit a resignation statement to the company, the Registrar, and the Comptroller and Auditor General of India within 30 days of resigning (CAG).
Penalties:
The resigning auditor is responsible for filing a statement containing relevant facts and reasons for resignation, and any violation of Section 140(2) will result in a penalty of fifty thousand rupees or an amount equal to the auditor’s remuneration, whichever is less, and in case of continuing failure, a further penalty of five hundred rupees per day for each and every day after first during which such failure continues up to at most five thousand rupees.
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Let's Deal With Your Confusions
To execute an audit, examine, and verify the correctness of financial records and to provide an opinion on whether or not the company's financial statements are free of serious misstatements caused by fraud or error, an independent individual or firm is recruited as an auditor.
The first auditor is the auditor appointed by the board of directors or the company within 30 or 90 days of the date of incorporation, respectively.
Yes. Regardless of business size, every organization must employ an auditor. Even if the business has no transactions, an auditor must be appointed.
If the LLP's annual revenue exceeds Rs. 40 lakhs or the capital contribution exceeds Rs. 25 lakhs, then an auditor must be appointed.
Yes. Form ADT-3 must be submitted within 30 days of your resignation to the Registrar of Companies, MCA.
Within ten minutes, an auditor can be appointed.
It depends on the authorized share capital of the company. For a company with one million authorized shares, the auditor resignation fee is Rs. 300.
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