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Auditing Theory

Notes 4. Intimate the auditor regarding his appointment within 7 days of appointment in AGM.
After receiving intimation from the company it is duty of the auditor to inform ROC
about his appointment through filing of form 23B within 30 days of intimation from
company.
5. Do not forget to collect a written certificate from the auditor or auditors proposed to be so
appointed to the effect that the appointment or reappointment, if made, will be in
accordance with the limits specified in sub-section (1B).

11.4 Auditors in Private Company

A private company which has elected to dispense with the laying of accounts before the company
in general meeting must appoint auditors in the general meeting held at least twenty-eight days
before copies of the company’s annual accounts is sent to the members. It may, however, elect to
dispense with the annual appointment of auditors, in which case the auditors are deemed to be
reappointed in each succeeding year unless a resolution is passed ending their appointment.
Within the accountancy profession, it is a requirement of professional ethics, for the person who
is approached on behalf of the company to take the place of retiring auditor, prior to giving
assent so to act, to ascertain from the retiring director whether there are any reasons why it
might not be proper or desirable to accept the appointment.

Exceptions

The first exception to the above mentioned general rule is that dormant companies that are not
required to prepare group accounts may by special resolution exclude the obligation to appoint
auditors. Such a resolution may be passed at any general meeting of the company at any time
after copies of the accounts, prepared under Section 226 of the Companies Act, 1985, have been
sent out in accordance with Section 238 (1), provided that it has been dormant since the end of
that financial year. Where the resolution is passed at a general meeting that is not the first such
meeting, the company must in addition, be entitled to the benefit of accounting exemptions
available to small companies, or must be ineligible for those exemptions only on account of the
fact that it is a member of an ineligible group. Alternatively, such a resolution may be passed at
any time, provided that the company has been dormant from the time of its formation, and
provided that it is not a public company, a banking or insurance company, or an authorized
person under the Financial Services Act, 1986. The other exception is with regard to private
companies which are exempt from the audit requirement, in which case they are also exempt
from the obligation to appoint an auditor.

General Rule of Resignation of Auditor

An auditor may resign before his term of office expires by depositing a notice in writing to that
effect at the company’s registered office. His resignation becomes effective on the date he lodges
such notice or on such later date as may be specified in the notice. The auditor’s notice of
resignation is not effective unless it is accompanied either by a statement to the effect that there
are no circumstances connected with his resignation which the auditor considers should be
brought to the notice of members or creditors of the company, or a statement of any such
circumstances. The vacancy caused by the resignation of auditors is to be filled by the company
in general meeting.

Removal of Auditors

Any auditor appointed under Section 224 except the auditors appointed by the Board of Directors
in pursuance of the proviso to Section 224(5) can be removed before the expiry of his term only

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