Auditor appointment

Stat Audit 474 views 3 replies

Agam Bhasin

B.Com (Hons) CA Final

114 Points Joined February 2010

HELLO FRIENDS

I have been in touch with a company client who wants to appoint our firm as the auditors, the issue is that the company's earlier auditor is not allowing the company to change the auditors of the company, the company has appointed us as the new auditors for the current year but the earlier auditor is warning about filing a complaint with the ICAI on the ground that we hv not communicated with the earlier auditors before accepting the appointment, whereas the company has adequate reasons for removal of the auditor as the earlier auditor has not done any TAX, MCA Filings and have not even compiled the financials of the company for the past three years, the company wants to continue with our appointment as the auditors but the earlier auditor seems to create unnecessary hurdles, i request you to kindly suggest ways so that the earlier auditor could be removed.

THANKS

Replies (3)

Gaurav Vora

187 Points Joined November 2010

Hi,

Before accepting the appointment as the auditor of the company, you should ensure that the Company has removed the previous auditor as per the process provided in sec. 140 (1), which are reproduced below.

Section 140 : Removal, Resignation of auditor and giving of special notice

The auditor appointed u/s 139 may be removed from his office before the expiry of his termonly by way previous approval of CG and a special resolution of the company to be passed in a general meeting within 60 days of receipt of approval of CG. However, before such step, the auditor shall be given a reasonable opportunity of being heard. The application to CG has to be made within 30 days of passing the board resolution. (Form No. ADT- 2 along with fees).

C.A. P. HAREESH KUMAR

PRACTICE

375 Points Joined July 2008

The issue raised is on lack of communication

The incoming Auditor need to communicate in writting with the old Auditor enquiring whether there is any professional or other reasons why the offer should not be accepted by him ( newauditor)

This communication has to be by regd post or by hand delivery with acknowledgement

If there is no reply within a reasonable time the new Auditor can go ahead

In case the old auditor replies the new auditor need to ascertain the reasons . For Eg non payment of fees , Issue of qualified report etc . The new auditor need to safe guard his professional interest . In case of non payment of fees the new auditor should take steps to ensure that the old auditor is paid .

The requirement of communication is in no way to prevent the change but for the protection of the interest of the profession

There can be no hurdles as you apprehend . You may consider your relationship with the old auditor and should not be too enthusiastic

Reason for removal is seemingly not the look out of the incoming auditor , of course you may enquire it . Compilation of accounts , filing MCA / Tax returns should not not be mixed with Audit

All the best