Reasons for the resignation of auditor

There are many reasons for the resignation of auditor like health issues of the Auditor, management not providing required information about the Company’s business, revenues, taxes, etc. If the auditor is not willing to continue in the company for any reason, he may give his resignation letter to the company.

Reasons for the resignation of auditor

Procedure for the resignation of auditor

Form ADT-3 can be filed online on the Ministry of Corporate Affairs (“MCA”) website and submit the resignation letter and form ADT-3 to the company also.

The board meeting is required to give effect to the resignation of auditor.

Take a consent letter from the new Auditor under Section 139 and 141 of the Companies Act 2013.

Contents of Application ADT-3 for the resignation of Auditor

Corporate Identification Number (CIN)

Name, Registered Address, and Email of the Company.

Category of Auditor if Individual or Firm

Income Tax PAN of auditor/auditor’s firm

Membership Number of the auditor/auditor’s firm

Address of the auditor/auditor’s firm

Email ID of the auditor/auditor’s firm

Reasons for resignation and any other relevant facts for the resignation of auditor.

REMOVAL OF AUDITOR

Auditor appointed by a company can be removed after giving him a reasonable opportunity of being heard from his/her office before the expiry of the term only by passing a special resolution and after obtaining the prior approval of the Central Government on that behalf.

Frequently Asked Questions

Section 25 of the Companies Act 2013, provides provision regarding deemed prospectus.

Subsection 1 states that if a company allows securities or agrees to allot securities with an intention that those securities will be offered to the public, then any documents which are issued to offer shares to the public shall be deemed to be a prospectus issued by the company. The effect is that all provisions and requirements for prospectus have to be followed for these documents as well and all liabilities shall be applicable as well.

Subsection 2 provides certain situations which shall be held as evidence that allotment of or an agreement to allot securities was made or entered into with the intention to eventually offer it to the public. There are two situations provided.

First, where the allottee offers the securities to the public within a period of 6 months from the allotment. Eg. Shareholder A was allowed securities by Company B on November 2021 and the shareholder offers those shares for sale to the public on January 2022. It shall be deemed that allotment to A was made with an intention to eventually make a public offer, as a period of 6 months is not over yet. That 6 months have not expired would be the evidence in the matter. The documents for the offer by the shareholder shall be deemed to be prospectus and requirements under the Act would follow.

Second, where the company has not received the full amount of securities as on the date of the offer, i.e., if at the time of offer for sale to the public by shareholder A, he has not made full payment on the securities allotted to him. In this case, as well it shall be deemed that allotment or agreement to allot was made with a view to making a public offer. The documents for the offer by the shareholder shall be deemed to be prospectus and requirements under the Act would follow.

In either case, if the company is able to prove otherwise, the provision shall not apply.

An Auditor can resign at any time before the expiry of his term as per the procedure laid down in the Companies Act, 2013 and the Rules made thereunder. This has nothing whatsoever to do with the fact whether Debentures, compulsory convertible or otherwise, have been issued by the Company. However, if the Auditor has issued any certificates in connection with the issue of Debentures by the Company, he may still be liable whether he continues as an Auditor of the Company or not.

A practicing Chartered Accountant is eligible to be appointed as the statutory auditor in a company. A statutory auditor is a title used in various countries to refer to a person or entity with an auditing role, whose appointment is mandated by the terms of a statute/Law.

Review of the companies or government's financial statements and records, this audit is required by Statue.

If the auditors fail to file the statement of resignation with the Registrar, he shall be liable to pay a penalty of Rs. 50,000 or an amount equal to his/her remuneration, whichever is less.

In case of continuing failure, auditor shall be liable to pay a penalty of Rs. 500 for each day of such continuing failure, subject to a maximum of Rs. 5 lakhs.

Fees prescribed by Ministry of Corporate Affairs (MCA) is:

Nominal Share Capital Fee Applicable
Less than 1,00,000 Rs. 200
1,00,000 to 4,99,999 Rs. 300
5,00,000 to 24,99,999 Rs. 400
25,00,000 to 99,99,999 Rs. 500
1,00,00,000 or more Rs. 600