Section 140 of Companies Act, 2013 deals with the Removal of Auditors
The procedure is as followed:
A. Removal of auditor:
If the Removal of Auditor is done before the expiry of his term (i.e. five years), it has to be done only by passing a Special Resolution by the company after obtaining previous approval from Central Government.
Before taking any action, the auditor concerned should be given a Reasonable Opportunity of Being Heard.
Application to the Central Government has to be made in Form ADT-2 as laid down in Rule 7 of the Companies (Audit & Auditors) Rules, 2014. The same form shall be accompanied by a fee which is prescribed under Section 12 of Companies (Registration offices & Fees) Rules, 2014.
Application has to be made within thirty days of the resolution passed by the board.
The company shall hold the general meeting within sixty days of receipt of approval of the Central Government for passing the special resolution.
Removal of Auditor by Special Resolution will be considered as Special Business for Section 102 of the Companies Act, 2013.
Form ADT – 2 requires the following information:
- Details indicating the grounds for seeking removal of auditor.
- Whether the accounts have been qualified during last three years (if yes, give details).
- Details of opportunity given to auditor concerned for being heard.
- Whether any civil or criminal proceedings are pending between the company and the concerned officers. Yes / No. If yes, give complete details.
- Date of appointment of the concerned auditor and SRN of notice of his appointment and period for which the auditor was appointed.
- Whether any special notice has been received for removal of auditors. Yes or No. If yes, the date of receipt of notice and the percentage of capital held by the members giving such notice or percentage of the number of members in case of company limited by members.
- Whether all due audit fee has been paid to the concerned auditors. If no, mention the amount of arrears.
- Details of other services been rendered by such auditors to the company.
- Pendency of Audit i.e, number of financial years for which audit is pending.
- Stage of accounts of the company for each of such financial year i.e, yet to be approved by the Board or approved by the Board but yet to be handed over to auditors or approved by the Board, handed over to auditors but audit not yet completed or audit completed, draft report not yet given by the auditors.
- Whether there is any dispute with regard to the Books of Accounts in the possession of auditors but not delivered back to the company. Yes or No.
B. Resignation by Auditor:
In case the Auditor has resigned from the company he shall file a Form ADT-3 of the Companies (Audit & Auditors) Rules, 2014 within thirty days from the date of resignation.
Where the company is a Government Company or other company owned or controlled, directly or indirectly by the Central Government, the auditor shall also file a statement with the Form ADT-3 with the Comptroller and Auditor General of India (who appointed him in this case), indicating the reasons and other facts as may be relevant with regard to his resignation.
The onus to file such statement containing relevant facts and reasons for resignation is on the resigning auditor and it is punishable with monetary fine which could be minimum Rs. 50,000 and Maximum Rs. 5 lakh.
Form ADT–3 require following information:
- Category of Auditor Individual/ Firm:
- Income Tax PAN of auditor or auditor’s firm.
- Name of the auditor or auditor’s firm.
- Membership Number of auditor or auditor’s firm’s registration number.
- Address of the auditor or auditor’s firm.
- Pin code
- Email id of the auditor or auditor’s firm
- Reasons for resignation.
- Whether letter of resignation is attached? Yes/No
- Any other facts relevant to the resignation
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