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Appointment of auditor

Sandeep Mishra (CA FINAL) (151 Points)

20 January 2010

Hi friends...

In Case where an auditor has resigned from the post , what is a procedure for appointing new director in his place??

Suppose , if company wants tp remove its auditor what procedure it has to follow??????

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8 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 20 January 2010

In case of resignation of auditor section 224(6) is applicable to fill the casual vacancy.

Section 224(6) governs this aspect and relevant provisions are stated hereunder:—

(a) The Board may fill any casual vacancy in the office of an auditor, but while any such vacancy continues, the remaining auditor or auditors, if any, may act.

(b) If any casual vacancy in the office of an auditor is caused by the resignation of an auditor, such vacancy shall only be filled by the company in general meeting.

Only members in general meeting may fill up the casual vacancy caused by resignation of auditors

Where the casual vacancy is caused by resignation of an auditor, the Board cannot fill up the casual vacancy but place the matter before the company in the extraordinary general meeting for appointing an auditor in respect of the casual vacancy.

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 20 January 2010

REMOVAL OF AUDITORS [Section 224(7)]

Board of directors has no power to remove an auditor

The Board of directors of a company has no powers to remove an auditor appointed by the company in general meeting. Accordingly, the said auditor can be removed only by the company in general meeting after receiving the previous approval of the Central Government under section 224(7). Powers has been delegated to the Regional Director vide Notification No. GSR 288(E), dated 31-5-1991.

Removal of auditor(s) at a general meeting with the prior approval of the Central Government

As per Section 224(7) an auditor can be removed before expiry of his term only by the company in general meeting after obtaining the previous approval of the Central Government (Power has been delegated to the Regional Director).

Procedure for removal of auditors

The company shall take further action as prescribed in section 225 and make an application to the concerned Regional Director in e-Form 24A as prescribed by the Notification No. GSR 56(E) dated 10^th Feb., 2006 for his approval.

As per section 225 a special notice of a resolution to be moved at an annual general meeting for appointing an auditor other than the retiring auditor or removing of an existing auditor is given to the company in the manner as prescribed under the Act.

Requirement of special notice to the company

Section 225(1) provides that special notice shall be to be given by a member and such special notice must comply with the requirements of section 190.

As per Department's Circular No. 5 of 1972, dated 21-2-1972 special notice shall be required for such resolution. Any non-compliance with the provisions of the said section would render such a resolution illegal and ineffective. Section 190 which provide a resolution requiring special notice applies to special notice under section 225.

Section 190 which provide a resolution requiring special notice applies to special notice under section 225.

COMPANY’S DUTY ON RECEIPT OF NOTICE

1. Intimation shall be given by the company to all members on receipt of notice or draft of resolution

The company shall on receipt of a notice or draft resolution from a member give intimation of the same to all the members immediately and where it is not possible to do so then give notice to the members by advertisement in the newspaper circulating in the place of its registered office, not less than seven days before the meeting.

2. Intimation shall be given by the company to the retiring auditor

On receipt of notice under section 225(1) of the Act, for the removal of a retiring auditor the company shall send a copy of the notice to the retiring auditor forthwith. It is advisable to send the same by registered post with acknowledgement due.

Circulation of the retiring auditors' representation to all the members

Where the retiring auditor makes a representation on the notice or resolution for their removal, the company shall circulate the same to all the members of the company, if it is possible to do so before the meeting. If it is not possible to circulate the representation to the members, the auditor may require the same to be read at the meeting, unless the Central Government on an application by the company or an aggrieved person orders that copies of the representation need not be sent to members nor read at the meeting.

Following are the other relevant provisions in this regard:—

(i) In case where the retiring auditor makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall do the following:—

(a) the company shall state the fact of the representations having been made, in any notice of the resolution given to members of the company;

(b) the company shall send a copy of the representations to every member of the company to whom notice of the meeting is sent, whether before or after the receipt of the representations by the company;

representations are received by it too late to do so;

(d) if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the auditor may require that the representations shall be read out at the meeting. This right is in addition to the right of auditor to be heard orally at the meeting.

(ii) Section 225 applies to all companies, whether public or private.

(iii) Any resolution requiring special notice must comply with the requirements of section 190.

Contravention of the provision of section 225 would attract penalty to the company under section 629A.

2 Like

CA Jimmit D Mehta (Employed) (494 Points)
Replied 20 January 2010

thanks Ankur ur article was helpful

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 22 January 2010

Thanx for gesture and comment.

Sandeep Mishra (CA FINAL) (151 Points)
Replied 22 January 2010

Thanks a lot Ankur........

it means if as a director of the company i want to change my auditor i will i have to follow above mentioned procedure..

Have a nice day...

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 22 January 2010

Yes, as per section 224(7) if the auditor is to be removed before the ex;piry of this term, he can be removed by the company in general meeting after obtaining the proveous approval of the Central Government and the procedure as mentioned above by Mr. Ankur Garg is to be followed. He defined very clear procedure.

Batul (Article assistant) (207 Points)
Replied 27 January 2010

According to Sec 224(6) Where a vacancy is caused by the resignation of an auditor, the vacancy shall only be filled by the company in a general meeting.

The board of directors may fill any other casual vacancy in the office of an auditor, while any such vacancy continues then :

1) The remaining auditor or auditors, if any,may continue to act as auditor/auditors

2) Any auditor appointed in a casual vacancy shall hold office until the conclusion of the next AGM