auditor is disqualified u/s 141(3) The solution is given in Explanation to of the Act.” Rule 3(7) of Companies (Audit and Auditors) Rules, 2014 which states that if There is a similar provision in case the appointment is not ratified by the company does not appoint or members of the company, the Board of reappoint existing auditors in Directors shall appoint another individual AGM under section 139(10), or firm as its auditor following the where, in such a case the existing procedure laid in the Act. auditor continues to be the auditor. Such non-ratification would result in OR vacancy in the office of the auditor which would be casual. Any casual vacancy in Explanation to sub-rule (7) of Rule the office of the auditor can be filled by 3 of Companies (Audit and the Board. Auditors) Rules, 2014 should be deleted and substituted as under: The management may find out ways to not ratify the appointment of the auditors For the purposes “Explanation.- in AGM, in order to remove the auditors, of this rule, it is hereby clarified without seeking prior approval of CG that, if the appointment is not (which is required as per 140(1) of the ratified by the members of the Act) hampering the independence of company, the auditor shall be auditors. deemed to be remain in office until the expiry of his term of office or unless expressly removed as per the procedure laid down in this behalf under the Act” 3 Audit Section 143 (12) requires the auditor to Removal procedure should not be X 143 (12) No report to the Central Government (CG) allowed to such company by anyfraud committed by employees or statute u/s 140(1) untilthe report of officers of the company on the company the auditor is taken to a logical which comes to his knowledge in the conclusion by the authorities (CG). course of his audit. But once any auditor reports such matters to CG, the company normally starts the process of removal of that auditor. As per the Act there is no protection available to the auditor.
The solution is given in Explanation to Rule 3(7) of Companies (Audit and Auditors) Rules, 2014 which states that if the appointment is not ratified by the members of the company, the Board of Directors shall appoint another individual or firm as its auditor following the procedure laid in the Act. Such non-ratification would result in vacancy in the office of the auditor which would be casual. Any casual vacancy in the office of the auditor can be filled by the Board. The management may find out ways to not ratify the appointment of the auditors in AGM, in order to remove the auditors, without seeking prior approval of CG (which is required as per 140(1) of the Act) hampering the independence of auditors. auditor is disqualified u/s 141(3) of the Act.” There is a similar provision in case company does not appoint or reappoint existing auditors in AGM under section 139(10), where, in such a case the existing auditor continues to be the auditor. OR Explanation to sub-rule (7) of Rule 3 of Companies (Audit and Auditors) Rules, 2014 should be deleted and substituted as under: “Explanation.- For the purposes of this rule, it is hereby clarified that, if the appointment is not ratified by the members of the company, the auditor shall be deemed to be remain in office until the expiry of his term of office or unless expressly removed as per the procedure laid down in this behalf under the Act” 3 Audit Section 143 (12) requires the auditor to report to the Central Government (CG) anyfraud committed by employees or officers of the company on the company which comes to his knowledge in the course of his audit. But once any auditor reports such matters to CG, the company normally starts the process of removal of that auditor. As per the Act there is no protection available to the auditor. Removal procedure should not be allowed to such company by statute u/s 140(1) untilthe report of the auditor is taken to a logical conclusion by the authorities (CG). X 143 (12) No
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