Dhara (Company Secretary) (298 Points)
21 October 2016Dear All,
In one of my Company , My Auditor has expired , now his son is going to sign the required financial documents . In this case which all forms needs to be filed ? i guess it would be casual vacancy but before filing ADT-1 what procedure needs to be followed?
Pls reply its urgent
CA Shree Jain
(Chartered Accountant)
(1572 Points)
Replied 21 October 2016
Please Confirm the Status of Auditors Firm ?
CA Shree Jain
(Chartered Accountant)
(1572 Points)
Replied 21 October 2016
Death of the auditor :
The law stipulates that only an individual or a firm of chartered accountants can be appointed auditors of a company. If an individual is appointed, his death would give rise to a casual vacancy. But if a firm is appointed, death of one or more of the partners does not give rise to a casual vacancy, except under the following two circumstances:
a) There exists a clause in the partnership deed that death of a partner dissolves the firm or conversely there is no clause in the deed that death of a partner does not dissolve the firm.
b) All but one of the partners die at a time.
If all but one of he partners of the firm die, the partnership firm does not exist any more. Therefore, the firm continuing as auditor of the company does not arise.
There is a change in the status from that of a firm to an individual.
The time of death of the auditor is crucial to decide if it is a casual vacancy. A contract is not complete unless the offer is accepted and such acceptance is communicated to the proposer. The appointment of auditor is, therefore, complete only when the auditor communicates his acceptance.
Passing a resolution at the meeting is just one of the parts of appointing an auditor. Such a resolution is only an offer. It is not appointment by itself. The company communicates to the auditor by way of a letter his appointment and the auditor communicates his acceptance or otherwise. The auditor gets 30 days to communicate his acceptance.
If the auditor dies in the meantime, (without communicating his acceptance) the appointment is not complete. Thus, it is not death of the auditor of the company. There is no casual vacancy. The situation is that it is deemed that no auditor has been appointed and provisions of Section 224(3) become operative.
For an appointment to be complete, the communication of acceptance should reach the company.
The answer for a situation where the acceptance is posted and the auditor dies before the letter reaches the company is determined by the Contract Act.
To constitute a casual vacancy by death of the auditor, the appointment should be valid and complete in all respects..
Filling up a casual vacancy :
The board of directors is empowered by Section 224 (6) to appoint an auditor in case of a casual vacancy except the vacancy caused by resignation of the auditor, in which case, the power vests only with the shareholders.
The law is silent on the time frame and the mode for such an appointment of auditor in a casual vacancy. Therefore, the board should take decisions in such a way as not to hamper the audit procedures and ensure timely compliance with legal proceedings.
The following questions arise:
Can the board delegate the authority to a particular director?
Can the auditor be appointed by the audit committee?
Can the appointment be by way of a circular resolution?
Answers to all the three questions seem to be "Yes".
The law does not specify that such a casual vacancy should be filled by the board of directors at a meeting of the board. Section 292 stipulates circumstances where decisions are to be taken only at a meeting of the board or of a committee. The list does not include appointment of auditor in a casual vacancy. It therefore implies that such an appointment need not be made only at a meeting of the board of directors.
Therefore, the board may delegate the authority to a particular director or to a committee of directors. The audit committee, which is formed to attend to the audit requirements, might as well appoint the auditor of the company, under the signature of a director, who is a member thereof.
Alternatively, the appointment can also be made by a circular resolution to overcome the time constraints and to provide that much extra time to the auditor.
Jatin Bajaj
(CS)
(2930 Points)
Replied 21 October 2016
According to section 139(8) of companies Act 2013, casual vaccancy of Auditor shall be filled by Board of Directors within 30 days by passing board ressolution in Board Meeting and shall hold the office till the conclusion of AGM of the company.
As per Auditor Rule, if Company wants to regularise such person as Auditor , then company has to file form ADT 1 within 15 days of AGM.
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