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Auditor Removal
Auditor Removal: The auditor appointed pursuant to section 139 may only be removed from office prior to the expiration of his term by a special resolution of the company and with the prior approval of the Central Government in that regard.
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Auditor Removal
Who is an Auditor:
Auditor is an independent person or firm hired to perform an audit, review, and verify the accuracy of a company’s financial records and to express an opinion on whether or not the company’s financial statements are free of material misstatements due to fraud or error.
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 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 such holding company;
- (e) a person or company who, directly or indirectly, has a business relationship with the company, its subsidiary, its holding or associate company, or a subsidiary of such holding or associate company;
- (f) a person whose relative is a 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 a 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.
Removal of an Auditor:
The auditor appointed under section 139 may only be removed from office prior to the expiration of his term by a special resolution of the company, with the prior approval of the Central Government in this regard:
Rule 7 and Section 140(1) of the Companies (Audit and Auditors) Rules of 2014:
The auditor appointed pursuant to Section 139 of the 2013 Companies Act may only be removed from office prior to the expiration of one’s term by:
- Obtaining the prior approval from the Central Government by submitting a completed Form ADT-2 within thirty days of the board's adoption of a resolution.
- An impartial individual or company engaged to conduct an audit, review, or The corporation must conduct its annual meeting within 60 days after receiving permission from the central government to enact the special resolution.
- The impacted auditor must be given a fair chance to be heard.
Required documentation for removal of an auditor:
The following documents are required for auditor dismissal.
- Board Resolution to dismiss
- A Central Government auditor (Power delegated to Regional Director)
- Member Approval Letter Resolution
Auditor removal process:
The following steps are required to dismiss an auditor:
- (a) Adopt the Board Resolution for the early termination of an auditor.
- (b) Submit Form ADT-2 to MCA for Regional Director approval and obtain approval from the Regional Director (RD).
- (c) Adopt the Members' Resolution to remove the incumbent auditor.
- d) Send a letter containing the reasons for dismissal to a demanding company auditor.
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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 about whether or not the company's financial statements are free of serious misstatements caused by fraud or error, an independent individual or firm is employed as the 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-2 must be submitted within 15 days of your removal to the Registrar of Companies, MCA.
Within thirty days, an auditor can be removed.
It depends on the authorized share capital of the company. For a company with one million authorized shares, the auditor removal fee is Rs. 300.
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