As part of our weekly update on the changes related to new Companies Act, 2013, today we update you on changes affecting Auditors of all type of companies. Some of the important provisions related to their Appointment, Resignation, Removal are as follows:
Appointment of first and subsequent Auditors
Applicability: Every Company Public or Private and every individual or firm engaged in statutory audit.
Compliance:
- Every Company shall at the first Annual General Meeting (AGM) appoint an individual or firm as an Auditor. The term of the auditor will come to an end on the conclusion of sixth AGM.
- Subsequent Auditor will be appointed at every sixth AGM.
- If at an AGM an auditor is not appointed, the existing auditor shall continue.
- If the company is required to form Audit Committee, then all the appointment including casual vacancy shall be made on recommendation of such Committee.
- Company shall inform the auditor of his appointment or re-appointment within 15 days of his appointment and intimate Registrar in Form ADT-1.
- Any casual vacancy of an auditor shall be filled by the Board of Directors within 30 days of such vacancy.
- If vacancy arises due to resignation then such appointment shall be approved by Shareholders in General Meeting within 3 months from the date of recommendation of the Board and term of such auditor will end at the conclusion of next AGM.
- Written consent and certificate of auditor for such appointment shall be obtained before his appointment.
Resignation of Auditor
Applicability: Every Company Public or Private and every individual or firm engaged in Statutory Audit.
Compliance: When an Auditor has resigned from the company he shall file a statement in Form ADT-3 within 30 days from the date of resignation.
If any auditor contravenes the above provision, then he shall be punishable with fine not less than Rs. 50,000 and up to Rs. 500,000.
Removal of Auditor before expiry of his term
Applicability: Every Company Public or Private and every individual or firm engaged in Statutory Audit.
Compliance: Auditor can be removed before expiry of their term by passing Special Resolution and obtaining Central Government approval.
The application to Central Government for removal of auditor shall be made in Form ADT-2.
The company shall hold a General Meeting within 60 days of receipt of approval of Central Government for passing Special Resolution.
Tribunal is empowered to change the Auditor of a company in case he is found to be involved in any fraudulent activities.
Disqualification of Auditors
Applicability: Every Company Public or Private and every individual or firm engaged in Statutory Audit
Compliance: The following persons shall not be eligible for appointment as an Auditor:
- A body corporate other than LLP ;
- An officer or employee of the company ;
- A partner or employee of an officer or employee of the company ;
- A person who by himself or by relative or partner hold any security in the company or its subsidiary or associate company ;
- A person who by himself or by his relative indebted the company or its subsidiary or associate company in excess of amount prescribed ;
- A person or firm who directly or indirectly has business relationship with company or its subsidiary or its holding or associate company ;
- A person whose relative is a director or in employment of company as Key Managerial Personnel ;
- A person who is in whole time employment elsewhere ;
- A person who has been convicted by a court of an offence involving fraud in last 10 years ;
- A person whose subsidiary or associate company or any other form of entity is engaged in consulting and specialized services.
Remuneration of Auditors
Applicability: Every Company Public or Private and every individual or firm engaged in Statutory Audit
Compliance: Remuneration of an Auditor shall be fixed by the Shareholders in the General Meeting. However, Board will fix the remuneration of first auditor only.
Auditors to attend General Meeting
Applicability: Every Auditor
Compliance: Notices of all AGM, or any communication related to it, shall be sent to the Auditors or his representative, and he shall, unless otherwise exempted to attend the same, shall have a right to be heard on any part of business concerning him as the Auditor.
Punishment for Contravention
Applicability: Every company Public or Private or and every individual or firm engaged in Statutory Audit
Compliance: Every company, Auditor who is in default shall be punishable with fine minimum of Rs. 25,000 and maximum up to Rs. 500,000.
Every officer of the company who is in default shall be punishable with imprisonment or fine, or both.
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You are requested to kindly follow the above mentioned points carefully and feel free to contact us in case of any doubts / concerns for any other matter related to New Companies Act, 2013 at below mentioned contact details-
Malavika Bhatia | <malavika.bhatia@bluelotusstrategy.com> | M +91 98733 18440
Monika Bhardwaj | <monika.bhardwaj@bluelotusstrategy.com> |M +91 98915 60525
We will do our best to assist you with the compliance’s and removal of doubts / queries. However, please note that since the Act is new, all rules are yet to get promulgated, hence in case of queries that require clarification from Ministry of Corporate Affairs, we will come back to you after seeking necessary clarifications from the Ministry
