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Each company needs to appoint an auditor to maintain its books of accounts as per the provisions of the Companies Act, 2013 (“Act”). The audit reports of the company prepared by an auditor are essential documents of the company. Thus, the company needs to appoint an auditor at its first Annual General Meeting.
A company can appoint any individual or a firm as it’s auditor. The auditor has to give his written consent to such an appointment. The company should file the notice of appointment of auditor to the Registrar of Companies, i.e. ROC (“Registrar”) within fifteen days of such an appointment.
An auditor may leave the company by resigning from it. If the auditor does not want to continue in the company for any reason, he may give his resignation letter to the company. The Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 (“Rules”) provide the rules and procedures which needs to be followed by the auditor while resigning from the company.
Section 140(2) of the Act provides for the resignation of an auditor. It states that an auditor needs to file a statement of resignation as provided in the Rules to the Registrar, within thirty days from the date of his resignation. In the case of the Government Company or Government owned company, the auditor of such a company will file the statement with the Comptroller and Auditor-General of India.
The auditor shall indicate his reasons and other relevant facts regarding his resignation in the statement. It is important that the auditor intimates his resignation to the Registrar. If the auditor fails to do so, it attracts penalty under the Act.
If the auditor does not file his statement of resignation, he shall be liable to pay a penalty of Rs 50,000 or an amount equal to his remuneration, whichever is less. In case of continuing failure, the auditor shall be liable to a further penalty of five hundred rupees for each day of such continuing failure, subject to a maximum of five lakh rupees.
The application or statement of resignation to be filed by the auditor intimating his resignation is provided in the Rules. The Rules provide that an auditor should file the application Form ADT-3 to the Registrar after resigning from the company.
Form ADT-3 can be filed online on the Ministry of Corporate Affairs (“MCA”) website, or it can be filled and given or posted to the Registrar. After the auditor submits his resignation and Form AGT-3 to the company, a board meeting shall be organised with all the directors for effecting the resignation. The company shall appoint a new auditor to fill the vacancy of the resigned auditor as per the provisions of the Act and Rules.
In the meantime, the company can also appoint a casual auditor to fill the vacancy in a general meeting within three months, and such auditor will hold the post until the conclusion of the next annual general meeting. After the resignation of the auditor, the company shall appoint a new auditor in the next annual general meeting.
In the case of a government company, an auditor will be appointed by the Comptroller and Auditor-General of India within thirty days from the resignation of the auditor.
The following information is to filled by the resigning auditor in the Form ADT – 3:
The auditor has to affix his digital signature to the form. The resignation letter, if any is to be attached with this form by the auditor.
The auditor has to pay the prescribed fee along with Form ADT-3 at the time of filing the form. The fee varies according to the share capital of the company of the resigning auditor. The fees prescribed by MCA is as follows:
|Nominal Share Capital||Fee Applicable|
|Less than 1,00,000||Rs 200|
|1,00,000 to 4,99,999|| Rs 300 |
|5,00,000 to 24,99,999||Rs 400|
|25,00,000 to 99,99,999||Rs 500|
|1,00,00,000 or more||Rs 600|
If the auditor submits ADT-3 beyond thirty days of his resignation, he has to pay the fees for the delay which varies according to the period of the delay.
An auditor is a person authorised to verify and review the accuracy of financial records. The auditor ensures that the companies comply with the tax laws. He/she protects the businesses from fraud and point out discrepancies in accounting methods helping companies to boost their operational efficiency. The appointment and resignation of the auditors by companies need to be given to the Registrar of Companies (ROC).
As per Section 140(1) of the Companies Act, 2013, the auditor appointed by a company can be removed from his/her office before the expiry of the term only by passing a special resolution and after obtaining the previous approval of the Central Government in that behalf.
When the auditor does not submit the statement of resignation with the ROC, he/she will be liable to a penalty of Rs.50,000 or an amount equal to the remuneration of the auditor, whichever is less. In the case of a continuing failure, the auditor will be liable to pay a further penalty of Rs.500 for each day after the first day during which such failure continues, subject to a maximum of Rs.2 lakh.
Yes. ADT-3 should be filed by every auditor at the time of resignation irrespective of whether the company is a public company, private limited company or government company.
The following is the procedure for an auditor’s resignation: