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Appointment or Resignation of Auditors
The appointment or resignation of auditors is a crucial compliance process for companies under the Companies Act, 2013. Auditors are responsible for ensuring the accuracy of financial records, adherence to regulatory standards, and transparency in corporate governance. Any appointment, resignation, or removal of an auditor must be formally approved by the Board of Directors and shareholders and reported to the Registrar of Companies (ROC) through prescribed forms.
Important
1. Regulatory Compliance : Ensures the company meets audit and financial reporting obligations under the Companies Act, 2013.
2. Financial Transparency : Independent auditors enhance credibility and investor confidence.
3. Legal Obligation : Non-compliance may result in penalties and legal consequences.
4. Corporate Governance : A proper audit process helps in fraud prevention and accountability.
5. Business Continuity : A smooth transition ensures uninterrupted financial audits and statutory filings.
Documents Required
For Appointment of Auditor
For Resignation of Auditor
For Removal of Auditor Before Term Completion
Features
Features & Benefits of Appointment or Resignation of Auditors
5-Year Term for Statutory Auditors
ROC Filing Required for Every Change
Voluntary Resignation Allowed
Central Government Approval
Appointment or Resignation of Auditors
Corporate Transparency
No Need for EGM in Some Cases
Strict Eligibility Criteria
Mandatory Rotation for Companies
Impact on Financial Filings
Comparison with Related Services
| Feature | Appointment of Auditor | Resignation of Auditor | Removal of Auditor | Change in Financial Year |
|---|---|---|---|---|
| Governing Law | Companies Act, 2013 | Companies Act, 2013 | Companies Act, 2013 | Companies Act, 2013 |
| Requires Board Resolution | Yes | Yes | Yes | Yes |
| Shareholder Approval Needed | Sometimes | No | Yes | Yes |
| ROC Filing Required | Yes (ADT-1) | Yes (ADT-3) | Yes (ADT-2) | Yes (MGT-7, AOC-5) |
| Special Resolution Required | No | No | Yes | Yes |
| Impact on Compliance Filings | Yes | Yes | Yes | Yes |
| Requires Central Govt. Approval | No | No | Sometimes | No |
| Ideal for | Appointing a New Auditor | Auditor Resigning Voluntarily | Removing Auditor Before Term Ends | Changing Financial Year |
Frequently Asked Questions
Is it mandatory to appoint an auditor for every company?
Yes, except for small private companies with turnover below ₹50 lakh, all companies must appoint an auditor within 30 days of incorporation.
What is the tenure of an auditor?
An auditor is usually appointed for five years and can be reappointed based on shareholder approval.
How can a company remove an auditor before tenure completion?
A company must pass a Board Resolution, obtain Shareholder Approval (Special Resolution), and file Form ADT-2 with ROC. In some cases, Central Government approval may be required.
What happens if an auditor resigns mid-term?
The auditor must submit a resignation letter with reasons, and the company must file Form ADT-3 with the ROC within 30 days.
Can the same auditor be reappointed?
Yes, unless the company falls under the mandatory auditor rotation rule (for listed and large private companies).
What are the penalties for non-compliance with auditor appointments?
Failure to appoint an auditor within 30 days of incorporation may result in penalties of up to ₹5 lakh for the company and ₹50,000 for officers in default.
How long does it take to update the auditor details with the ROC?
It usually takes 7-15 days after filing Form ADT-1, ADT-2, or ADT-3.
Is shareholder approval required for every auditor change?
No, only for removal before term completion or appointment in certain cases.