REGARDING STATUTORY AUDIT of a private company

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When a sole proprietorship auditor merges with a partnership firm, the original appointment becomes invalid. The company must treat this as a casual vacancy and appoint the new partnership firm as the auditor. This requires a board meeting to approve the new auditor, followed by filing Form ADT-1 with the ROC within 15 days of the appointment. The company needs to ensure proper documentation, including consent letters and an explanatory note on the merger, to avoid audit objections.

Priyanka Agarwal

Priyanka Agarwal (Querist)

18 December 2025 if a company has appointed in its 1st agm held on 9.12.2024 auditor (sole proprietorship firm) for a period of 5 years till 2029 agm . further the auditor so appointed has merged with a partnership firm loses his former existence and emerge in the new name in the fy 2024-25 then who will audit the accounts of fy 2024-25 of the company and the whole process which a company needs to undergo

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

20 December 2025 The new partnership firm can audit the accounts only if it is appointed by the company.
• Until such appointment is regularized, the old firm (which has ceased to exist) cannot sign the audit report.
• Practically, the company must fill the casual vacancy caused by the merger.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

20 December 2025 Here’s the compliance roadmap:
1. Board Meeting
• Place the matter before the Board.
• Approve appointment of the new partnership firm as auditor in place of the sole proprietorship firm.
• Fix date of EGM (if required).
2. Casual Vacancy Rules (Section 139(8)):
• If the vacancy is due to resignation → Board recommends, shareholders approve in General Meeting within 3 months.
• If due to other reasons (like merger/closure) → Board can fill the vacancy, but appointment must be ratified in the next AGM.
3. Filing with ROC
• File Form ADT-1 within 15 days of appointment of the new auditor.
4. Documentation
• Obtain consent letter and eligibility certificate from the new firm (per Section 141).
• Maintain explanatory note in Board minutes about merger and cessation of old firm.
• Keep copy of resignation/merger intimation from old auditor.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

20 December 2025 Treat this as a casual vacancy and follow Section 139(8).
• Ensure timely filing of ADT-1 and proper documentation to avoid audit objections.
• Communicate clearly in Notes to Accounts/Audit Report about the change in auditor due to merger.

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