AUDITOR UNDER

COMPANY LAW
REMUNERATION, TERM OF OFFICE, RESIGNATION
AND REMOVAL OF AUDITOR

PRESENTED BY- ALOK RANJAN

INTRODUCTION

Each company needs to appoint an auditor to maintain its books of accounts as per the
provisions of the Companies Act, 2013 (“Act”). The audit reports of the company prepared
by an auditor are essential documents of the company. Thus, the company needs to appoint
an auditor at its first Annual General Meeting.
A company can appoint any individual or a firm as it’s auditor. The auditor has to give his
written consent to such an appointment. The company should file the notice of appointment
of auditor to the Registrar of Companies, i.e. ROC (“Registrar”) within fifteen days of such
an appointment.
WHO IS AUDITOR OF A COMPANY?
An auditor is a person or firm that reviews and verifies the accuracy of financial records and ensures that
companies comply with tax laws. They are usually accountants or accounting firms.

An auditor's primary objective is to protect businesses from fraud, highlight any discrepancies in
accounting methods, and ensure that companies comply with tax norms. They may also specialize in
specific industries, such as retail or finance.

An auditor is a person who makes an independent report to a company's shareholders ('members') to show
whether the company has prepared its financial statements according to company law and other financial
reporting rules.
 DUTIES OF AUDITOR

•Reviewing financial statements, internal processes, and transaction records to assess accuracy and
completeness
•Making an independent report to a company's shareholders to show whether the company has prepared its
financial statements
•Guiding management on improving recording and reporting processes
•Accessing information, obtaining explanations, communicating with stakeholders, and requesting additional
information
•Maintaining independence, exercising due care, reporting findings, and maintaining confidentiality
REMUNERATION OF AUDITOR (SECTION 142)
(1) The remuneration of an auditor appointed by the members of a company
must be fixed by the members by ordinary resolution or in such manner as the
members may by ordinary resolution determine.
(2) The remuneration of an auditor appointed by the directors of a company
must be fixed by the directors.
(3) The remuneration of an auditor appointed by the Registrar must be fixed by
the Registrar.
(4) For the purposes of this section ”remuneration” includes sums paid in
respect of expenses.
(5) This section applies in relation to benefits in kind as to payments of money.
 TERM OF OFFICE OF AUDITOR

The Companies Act, 2013 states that auditors must serve a term of five
consecutive years. The term of an auditor is one or two terms of five years, as
specified in section 139(2) of the Act.
An audit firm can serve two terms of five consecutive years each. Companies
cannot appoint an individual as an auditor for more than one term of five
consecutive years, except for one person companies and small companies.
The auditor must hold office from the end of the first AGM until the end of
the sixth AGM. After that, the auditor must hold office until the end of every
sixth AGM.
RESIGNATION OF AUDITOR (SECTION 140)
Section 140(2) of the Act provides for the resignation of an auditor. It states that an auditor needs to file a
statement of resignation as provided in the Rules to the Registrar, within thirty days from the date of his
resignation. In the case of the Government Company or Government owned company, the auditor of such a
company will file the statement with the Comptroller and Auditor-General of India.
The auditor shall indicate his reasons and other relevant facts regarding his resignation in the statement. It is
important that the auditor intimates his resignation to the Registrar. If the auditor fails to do so, it attracts penalty
under the Act.

•The auditor has to submit the resignation letter and form ADT-3 to the company and ROC.

•A board meeting will be organised with all the directors to effect the resignation.

•The company should obtain a consent letter from the new auditor firm under Section 139 and 141 of the

Companies Act 2013.

REMOVAL OF AUDITOR

As per Section 140 of the Companies Act, 2013, an auditor may be removed before
the expiry of his term only by passing a special resolution in the general meeting
and after obtaining the previous approval of the Central Government. However,
before removal, the auditor shall be given a reasonable opportunity of being heard.
When Can Tribunal Direct Removal of Auditors?

The tribunal has the power to remove the auditors of the Company. It can act suo-moto or on an
application made by the Central Government and upon satisfaction that the auditor of the company acted
in a fraudulent manner or colluded or abetted in any fraud in relation to the company, its officers or
directors, it can direct the Company to change its auditors.