Retirement and appointment of Statutory Auditors

This query is : Resolved

Sara......... (Querist)
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25 October 2007 Suppose the statutory Auditor resigns during the year ie before the close of the financial year and a new Statutory Auditor is appointed immediately in the special meeting then the new auditor will have to do the audit and give his report -- Right isnt it?

But suppose the original Auditor resigns after the financial year then what is the implication or duty of the new Auditor. Who should complete the audit and sign the Audit report.

Kindly advice

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)
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25 October 2007 The coming auditor should do the same

S.RAVICHANDRAN

S.RAVICHANDRAN (Expert)
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25 October 2007 As for the statutory audit is concerned, the statutory auditor in the office of the company during the time of audit, ie. after the financial year ending is to give audit report.

Therefore the new statutory auditor has to conduct audit afresh and submit report to members.

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Sara.........

Sara......... (Querist)
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26 October 2007 So from what date the new Auditor should get the letter of appointment. I mean, will it be advisable to accept the resignation letter from the existing statutory auditor, dated prior to the financial year end and the new auditor gets the letter of appointment before the financial year end?

CA Avinash Haldia

CA Avinash Haldia (Expert)
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26 October 2007 Appointment of auditor is generally made till the conclusion of AGM. Hence, if the existing auditor resigns during the year or after completion of FY, it does not make a difference. New auditor has to to audit of accounts to be presented before the next AGM. A draft resolution for the appointment of auditor is as under:

Appointment of Auditors-Ordinary Resolution
Section : 225
Passing Authority : General meeting
Nature Of Resolution : Ordinary resolution
Resolution : "RESOLVED that the retiring Auditors M/S ________________, Chartered Accountant, _________________, be and is hereby re-appointed as Auditors of the Company, who shall hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting on a Remuneration to be negotiated and fixed by the Board of Directors of the Company.

Sara.........

Sara......... (Querist)
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26 October 2007 Resolution : "RESOLVED that the retiring Auditors M/S ________________, Chartered Accountant, _________________, be and is hereby re-appointed as Auditors of the Company, who shall hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting on a Remuneration to be negotiated and fixed by the Board of Directors of the Company.
The above resolution is for appointing the retiring Auditor only. So can the same be modified to include as
Resolved further to appoint M/s......... Chartered Accountants, (the new Chartered Accountant) who shall hold office from this Extraordinary General Meeting to the next Annual General Meeting ........and so on.

R.V.RAO

R.V.RAO (Expert)
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26 October 2007 IF A STATUTORY AUDITOR HAS RESIGNED DURING FINANCIAL YEAR,GENERALLY IT WILL ALSO BE CLEARLY UNDERSTOOD BETWEEN THE AUDITOR AND MANAGEMENT AS TO WHO WILL COMPLETE THE AUDIT AND FROM WHAT DATE THRE RESIGNATION WILL TAKE PLACE AND FROM WHAT DATE THE NEW AUDITOR APPOINTMENT LETTER WILL BE ISSUED AFTER APPOINTING HIM IN THE EGM.
THIS IS BECAUSE UNLESS THE NEW AUDITOR GETS NO OBJECTION CERTIFICATE FROM OLD AUDITOR ,HE CANNOT COMMENCE THE AUDIT OF THE NEW CLIENT(ICAI GUIDELINES).
MOREOVER THE NEW AUDITOR HAS TO INFORM THE ROC BY WAY OF AN INTIMATION ABOUT HIS NEW ASSIGNMENT.
I FEEL, WE CANNOT , CLUB THE AGM AND EGM RESOLUTIONS. BOTH ARE TWO DIFFERENT MEETINGS.
THE RIGHT COURSE WOULD BE
1. FIRST THE OLD AUDITOR RESIGN
2.CONVENE BOARD MEETING ON THE ISSUE
3.TAKE ACCEPTANCE OF THE NEW AUDITOR THAT HE IS FREE TO TAKE THE APPOINTMENT IF APPOINTED BY EGM
4.HOLD AN EGM AND APPOINT NEW AUDITOR IN PLACE OF OLD AUDITOR WHO RESIGNED
5.SEND NEW AUDITOR INTIMATION OF HIS APPOINTMENT IN EGM FORMALLY AND THEN TAKE HIS ACCEPTANCE.
6.THE NEW AUDITOR WILL THEN GET NOC FROM OLD AUDITOR,FILE INTIMATION OF HIS NEW ASSIGMNMENT TO ROC AND THEN COMMENCE HIS AUDIT.
WE PRACTICALLY DID ALL THESE STEPS TO CHANGE THE AUDITORS IN BOTH LISTED AND UNLISTED COMPANIES.THIS IS A RIGHT ROYAL COURSE.
OTHERWISE SHAREHOLDERS OR DIRECTORS OR OLD AUDITORS CAN RIGHTLY RAISE AN OBJECTION ,THAT THE APPOINTMENT OF NEW AUDITOR IS NOT MADE AS PER LAW AND IF THAT IS PROVED , EVEN HIS CERTIFICATIONS OR AUDITED ACCOUNTS WILL NOT BE ACCEPTABLE.
R.V.RAO

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Sara.........

Sara......... (Querist)
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27 October 2007 Thanks, I got all the clarifications I need.

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