[Case Study] Consequences of Non-filing of Statutory Auditor’s Resignation

[2022] 138 taxmann.com 458 (Article)

Statutory auditor’s appointment

Any individual trained to review and verify accounting data and recognised as a Chartered Accountant (CA) under the Chartered Accountant Act, 1949 is deemed to be an auditor. Every company needs to appoint an auditor as per the provisions of the Companies Act, 2013. The companies can appoint an individual chartered accountant or a firm of chartered accountants as its auditors. In case of appointment as a firm as an auditor, the partner of the firm would be signing the audit report on behalf of the firm.

Purpose of appointment of auditor

The purpose of appointing an auditor in a company is to protect the interests of the shareholders. The auditor is obligated and mandated by law to examine the books of account maintained by the company and inform the shareholders of the true financial position of the company. Auditor gives his independent opinion to the owners i.e. the shareholders of the company to protect and keep the company in a safe financial condition.

Procedure of appointment of auditors in a company

In case of listed companies, public and private companies the first auditor of the company, immediately after the incorporation of the company is done by the board of directors of the company within a period of 30 days from the date of incorporation. Registration. The appointed auditors would hold the office of the auditors till the conclusion of the first annual general meeting of the company.

Appointment of subsequent auditors

At the first annual general of the company, with a written consent and the required eligibility certificate from the auditor, the appointment of auditor is done by the members and the auditors so appointed will hold office till the end of the 6th annual general meeting (i.e. for a period of five years). The appointment shall be in accordance with the provisions of the Companies Act, 2013 relating to the appointment conditions laid down by the auditor and the appointment is made pursuant to section 139 of the Companies Act, 2013.

Resignation of the auditor and the compliance requirement

The auditor appointed in the company under section 139 of the Companies Act, 2013 can also resign if the auditor wants to resign from his post and the auditors is mandatorily by law required to intimate the Registrar of the Companies by filing the prescribed form ADT-3 within 30 days from the date of resignation. The requirement of filing the form ADT-3 is pursuant to section 140(2) of the Companies Act, 2013 read with Rule 8 of the Companies (Audit and Auditors) Rules 2014. The relevant provisions is given below for ready reference.

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