Auditors appointment-rectification

This query is : Resolved

Prakash Joshi (Querist)
Follow

30 January 2023 An urgent query -pls help

A Pvt Ltd co had appointed X as its statutory auditors in 2019 for 5years till FY 2023-24.
Later on they developed some differences. In 2021-22 after the AGM for 2020-21(AGM date 30/11/2021) the company appointed another auditor Y as its auditors for 5 years in place of existing auditor X without intimating him and by oversight some jr staff in the company filed ADT-1 on 20the June 22 for auditor Y.But auditor officially resigned on 20th Sep 2022 after the settlement of his account and thereafter filed ADT-30th Sep 2022.
Now the situation is that form ADT-1 for appointment of new auditor has been filed before (ie on 20th June,22) the filing of form ADT-3 on 30th Sep 22 for outgoing auditor. Is this a serious non-compliance if it is left as it is.

Can anyone suggest any way out to rectify this.

What if the company files another ADT-1 after 3oth Sep 22(say 10th oct) appointing auditor Y as auditor in casual vacancy to conduct the audit for FY 2021-22 and then re-appoints him auditor for 5 years in the AGM of 2022(the co has time to hold AGM till 30/09/2022)

PC Joshi

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

12 July 2024 The situation you described involves a potential non-compliance with the filing sequence of Form ADT-1 (for appointment of auditor) and Form ADT-3 (for resignation of auditor). Here’s how you can address and rectify the issue:

### Understanding the Non-Compliance:

1. **Sequence of Filing**:
- Form ADT-1 should ideally be filed after Form ADT-3 to ensure the proper sequence of appointment and resignation of auditors.
- In your case, Form ADT-1 for the new auditor Y was filed on 20th June 2022 before Form ADT-3 for the outgoing auditor X was filed on 30th Sep 2022.

2. **Implications**:
- This non-compliance could lead to questions about the validity of the appointment of auditor Y since the resignation of auditor X was not officially communicated to the Registrar before appointing a new auditor.

### Rectification Steps:

To rectify the situation, you can consider the following steps:

1. **File Corrective Form ADT-1**:
- File another Form ADT-1 after 30th Sep 2022 (say on 10th Oct 2022) to appoint auditor Y to fill the casual vacancy created by the resignation of auditor X.
- Ensure that this Form ADT-1 explicitly states that auditor Y is being appointed to fill the casual vacancy for conducting the audit of FY 2021-22.

2. **Re-appointment in AGM 2022**:
- During the upcoming AGM (by 30th Sep 2022), re-appoint auditor Y for a fresh term of 5 years starting from FY 2022-23.
- This re-appointment should be properly recorded in the minutes of the AGM and filed with the Registrar along with Form ADT-1 within the stipulated time frame.

3. **Communication with Registrar**:
- Alongside filing the corrected Form ADT-1, consider providing a letter of explanation to the Registrar explaining the sequence of events and the steps taken to rectify the filing discrepancy.
- This communication helps demonstrate your company’s proactive approach to compliance.

### Legal and Professional Advice:

- It’s advisable to consult with a professional auditor or legal advisor who specializes in corporate governance and compliance to ensure that the steps taken align with legal requirements and minimize any potential penalties or repercussions.

- The Registrar of Companies (RoC) may provide specific guidelines or instructions on how to rectify such filing discrepancies. Checking with them directly or through your legal advisor would be prudent.

By following these steps and seeking appropriate advice, you can rectify the filing sequence issue regarding the appointment and resignation of auditors effectively and ensure compliance with regulatory requirements.