Procedure for Removal and Resignation of Auditor

Under the Companies Act, 2013, an auditor is an independent professional who plays a important role in ensuring transparency, accountability, and reliability in the company's financial reporting. A company can appoint an individual or a firm as its auditor and must file a notice of the auditor's appointment with the Registrar of Companies within fifteen days. If the auditor wishes to resign, they must submit a resignation letter following the rules outlined in the Companies Act and the Companies (Audit and Auditors) Rules, 2014. These rules ensure proper procedures are followed for auditor resignations, maintaining transparency and compliance in corporate governance.

Removal of the Auditor before the Expiry of Term

An auditor appointed under section 139 of the Companies Act, 2013 cannot be removed from his office before the expiry of his term. However, there is an exception. An auditor can be removed before the expiry of term only after obtaining prior approval of the Central Government and passing a special resolution. Below is the procedure for removal of the Auditor-

• The company shall pass a board resolution for removal of the auditor.
• After passing the board resolution the Company shall make an application to the Central Government in Form ADT-2 seeking approval for removal of the auditor along with the requisite fees, within 30 days of passing the board resolution. The following details shall be attached along with the application-

1. Copy of the resolution
2. Grounds for seeking removal of the auditor.
3. Any other optional attachments

• The Central Government, upon receipt of application and being satisfied that it is necessary to do so, shall pass an order for removal of the auditor.
• The company shall within 30 days of receipt of approval shall convene a general meeting and pass a special resolution for removal of the auditor.
• An opportunity of being heard shall be given to the auditor before removal of such auditor.

Fees prescribed for Form ADT-2

Resignation by the Auditor

An auditor can resign from being the auditor of the company on various grounds. Below is the procedure to be followed after resignation-

• The auditor shall within 30 days of resignation shall make an application in Form ADT-3 with the company as well as the registrar.
• In case of an auditor of a Government Company, such application in Form ADT-3 with the Comptroller and Auditor General of India.
• The application file shall include the reasons and other facts which are relevant to the resignation.
• If the auditor does not comply with the above provision he shall be punishable with a fine of Rupees fifty thousand or the remuneration received by the auditor, whichever is less. In case of continuing offence the auditor shall be liable to pay a fine of Five Hundred Rupees for each day subject to maximum Rupees two lakh.

Contents of Application (ADT-3)

The following information is to filled by the resigning auditor in the Form ADT – 3:

1. Corporate Identification Number (CIN)
2. Name, Registered Address and Email of the Company.
3. Category of Auditor if Individual or Firm
4. Income Tax PAN of auditor/auditor’s firm
5. Membership Number of the auditor/auditor’s firm
6. Address, City, State, Pin Code and Email ID of the auditor/auditor’s firm
7. Reasons for resignation and any other relevant facts for resignation.

The auditor has to affix his digital signature to the form. The resignation letter, if any, is to be attached with this form by the auditor.

Fees Prescribed for the Application (ADT-3)

The auditor has to pay the prescribed fee along with Form ADT-3 at the time of filing the form. The fee varies according to the share capital of the company of the resigning auditor. The fees prescribed by MCA is as follows:

If the auditor submits ADT-3 beyond thirty days of his resignation, he has to pay the fees for the delay which varies according to the period of the delay.

• 4 times normal fees for 30-60 days.
• 6 times for 60-90 days. 
• 10 times for 90-180 days.
• 12 times for over 180 days.