Auditor's removal prior to the term
What is an audit?

An audit is analysing the financial reports of a company or an organisation by a practicing Chartered Accountant.
It incorporates preparing balance sheets, cash flow statements, annual reports, tax filing, and much more.

What is the role of an auditor?

• An auditor is an independent Chartered Accountant, who possesses the know-how to conduct a professional audit.
• He/she analyses and verifies the correctness of financial data and confirms that companies follow tax regulations.

Removal before the end of tenure

• Section 140(1) of the Companies Act, 2013, explicitly stipulates the due procedure for the removal of an auditor, designated as per section 139, from his/her position before the conclusion of tenure. 
• For the same, it is mandatory to pass a Special Resolution by the company’s board of directors and also take prior approval from the Central Government.
• Within 30 days from the date of passing the Special Resolution by the board, an application to the Central Government to remove the auditor must be duly submitted in Form ADT-2.
• The company must also conduct a General Meeting within 60 days from the date of receiving clearance from the Central Government approving the Special Resolution.
• It is also obligatory that the auditor must be offered a fair opportunity to be heard during the meeting, according to the provision.

Removal post-tenure

• If the retiring auditor has served continuously for a period of 5 years or 10 years, as mentioned in Section 139, the company carries the mandate, at its Annual General Meeting, to nominate another Chartered Accountant to serve as its auditor.
• In such a situation, a notice must be issued during the Annual General Meeting for approval of the resolution affirming the employment of a Chartered Accountant to operate as an auditor other than the retiring auditor.
• It is mandatory to clearly declare that the departing auditor is ineligible for re-appointment.
• The company must also present a copy of such notification to the departing auditor.
• An auditor who is departing is also entitled to make a Representation.
• When a departing auditor makes a Written Representation and requests that the company informs its employees the same. The company must specify in the notice to all the concerned employees that the Representation has been formally
  declared by the retiring auditor.
• Every single employee of the company, who is entitled to get the notice of the meeting shall also be given a copy of the submission made by the auditor. If the company fails to provide it, then the auditor's report shall be read during the course of the meeting.
• It is mandatory for the company to follow the aforementioned procedure in case of the removal of the auditor before his/her tenure.

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