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Help regarding removing auditor

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When any new parner in a chartered accountant firm enters it is only constitution of firm changes.

In 2002 a company's relation has been spoiled with its statutory auditor which is in surat(both c.a. and company).

Now in between 2003 - 2004 the company is working with a c.a. firm placed in kolkata.

Now in dec 2004 the firm has opened a new firm in surat and the new partner was the one, with the whom company has spoiled relationship in the last year.(old c.a.)

Now he will do the company's audit as the firm has opened branch in surat.

So as company has not good relationship with him , can company change ca firm only for that reason that company will not like to work with him again?

Than you everyone whosoever replies,,..,,..,,

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2 Replies

Harpreet (* * * * * *) (1670 Points)
Replied 03 May 2011

As per Section-224 of Companies Act, 1956 Every company shall, at each annual general meeting, appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting and shall, within seven days of the appointment, give intimation thereof to every auditor so appointed.

So an Auditor can be appointed by the shareholders from one AGM to the next AGM.

DISCONTINUATION OF STATUTORY AUDITOR

There may be 3 kind of removal in companies act.

1. Company may remove Ist auditor in GM by passing OR as mentioned in section 224(5). for this special notice is not required. Procedure of sec.225(2) & (3) shall apply.

2. under section 224(7) a company may remove statutory auditor before the AGM with the prior approval of CG. for this also special notice is not required. Procedure of sec.225(2) & (3) shall apply.

3. Lastly an auditor may also be removed by the company at the AGM as per the provisions of section 225(1). Special notice is required for the same and procedure given in sec. 225(2) & (3) required to be followed.

Please go through all the sections mentioned above.

REASON/LOGIC BEHIND NO CG APPROVAL REQUIRED FOR REMOVAL AT THE AGM

As at the AGM the removal is in the handa of shareholders and not in the hands of management. That's why law exempts the CG approval for this. On the other hand in removal before the expiry of the term he may be removed by management unreasonably for not agreeing to management's wrong demands. Hence CG's approval is required to prevent auditor's independence.

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 05 May 2011

The directors can place a resolution for change of auditor. There is no need to assign a reason. However, the out going auditor shall get and opportunity of being heard, i.e representation. If the shareholders approve the removal of the auditor and appointment of new auditor, there is no problem in it.