The fundamental goal of the audit is to render an authentic and fair representation of the financial details provided in the annual report, which reflects the Company’s financial situation for the financial year. It is the responsibility of an auditor to perform this work. Notably, there are situations when management is disappointed with the Auditor’s services; that’s when the Auditor is removed.
For removal of Auditor, ADT 2 is filed. This blog discusses how to remove an auditor and file e-form ADT 2 with ROC for removal.
Removal of Auditor under Companies Act,2013
Section 140 of the Companies Act,2013 allows the Company to remove the Auditor before his term. Also, the section outlines the procedure for doing so, which means that the Auditor appointed u/s 139 may be dismissed from his/her office before the expiration of his tenure only by passing a special resolution in the Company. But before passing the Special resolution, prior consent of the Central Government (R.D.) is required.
However, before initiating the procedure for removal of the Auditor, the Auditor concerned shall be given a reasonable opportunity of being heard.
Forms required for Removal of Auditor-
Following forms are required for Removal of Auditor-
- ADT 2
Documents required for Filling ADT 2
- Details of the ground for seeking removal of AuditorOptional Attachment, if required.
However, along with these documents as an attachment, various other details are also required-
- Particulars of the Company (CIN, Name, Address and E-mail Id)
- Details of the applications clearing specifying the grounds of removal of Auditor.
- Details of Opportunity of Being heard given to the Auditor.
- Details and period of appointment of the concerned Auditor.
- Details of special notice given to the concerned Auditor.
- Details of Pendency of Audit, if any.
Whether the accounts have been conceded during the last three years
·Whether the fee for audit has been paid or not.
Steps required for the removal of Auditors
As per section 140 of Companies Act 2013 read with companies (audit and auditors) rules, 2014, provisions are specified for the removal of Auditor before the expiry of his or her terms. For the same, the below-mentioned steps are to be followed-
- Fix the date of the Board Meeting along with the agenda to be discussed in the meeting. Before conducting the meeting, the Company shall-
- Issue the notice to the Company’s Board of Directors at their addresses registered with the Company. The notice shall be facilitated at least seven days before the board meeting date.
- Shorter notice can be issued in case of urgent business.
- Also, Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
- Intimate the concerned Auditor, and he/she has to be given a reasonable opportunity of being heard.
- Convene a Board Meeting & pass the Board resolution.
- Filing an Application to the Regional Director within 30 days of the of passing the Board resolution in Form ADT 2 along with the details of the grounds for seeking removal of Auditor.
- The Regional Director, upon receiving the application, shall give a date for the hearing. After hearing, R.D. may approve the removal of the Auditor.
- After getting approval, fix the Board meeting for declaring the same and approving. After Board Approval of director, Fix the General Meeting for removal of Auditor before their term within sixty (60) days.
- Conduct the general meeting and pass of special resolution for the same.
- File MGt-14 within thirty days from the date of passing the Special resolution.
Power of Tribunal
A National Company Law Tribunal can either-
- On an application from the Central Government or,
- On an application from Person concerned or,
- Suo Motto basis
Can order the Company to change the Auditor, if it is of the view that the Auditor of a Company has whether directly/ indirectly acted fraudulently or supported or conspire in any fraud by or in relation –
- its directors or
- Officers than the Tribunal may, by order, direct the Company to remove its auditors.
In case the central government makes the application, and the NCLT is satisfied that the Auditor’s change is required, it shall, within 15 days of receipt of the application, make a judgment that the Auditor shall not serve as the Auditor of the Company and central government may appoint another auditor in his place. This can only possible if the application is made by the C.G., not by any other person.
The Auditor against whom NCLT has passed the final order for removal under section 140 cannot serve any company as an auditor for five years from the date on which the judgement was passed.
In a nutshell, The Auditor appointed in the Company on several grounds can be removed from his office before the expiration of his/her term. This can be done by bypassing a Special Resolution and by giving a concerned auditor shall get an opportunity of being heard.]
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