Auditor Exit in a Company
Resignation | Removal | Casual Vacancy – Everything You Need to Know under Companies Act, 2013
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Basic Plan
+GST
Change within Same ROC & State
- Legal Consultation for Address Change
- Drafting of Rental Agreement
- Filing Form INC-22 for Change of Address
- Electronic Confirmation of Address Change
Standard Plan
+GST
Distinct ROCs within a Single State
- Legal Consultation for Address Change
- Drafting of Special Resolution for Shareholder's Approval (if required)
- Filing Form MGT-14 for Special Resolution (if required)
- Drafting of Rental Agreement
- Filing Form INC-22 for Change of Address
- Electronic Confirmation of Address Change
Premium Plan
+GST
Change outside the state
- Legal Consultation for Address Change
- Drafting of Special Resolution for Shareholder's Approval (if required)
- Filing Form MGT-14 for Special Resolution
- Drafting of Rental Agreement
- Assistance with Newspaper Advertisement
- Filing of Form INC-23
- Filing Form INC-28 for Interstate Address Change (if applicable)
- Electronic Confirmation of Address Change
What is Auditor Exit
An auditor exit refers to the process where a statutory auditor of a company resigns, is removed, or ceases to hold office due to completion of tenure or any other reason. It is a legally regulated process under the Companies Act, 2013 and requires proper documentation, approval, and reporting to the Registrar of Companies (ROC).
It ensures transparency in financial reporting and protects the interests of stakeholders. The company must also appoint a new auditor within the prescribed time to stay compliant.
Legal Framework Governing Auditor Exit
| Section | Provision |
|---|---|
| Section 139 | Appointment & reappointment of auditors |
| Section 140 | Removal and resignation of auditors |
| Section 141 | Eligibility, qualifications & disqualifications |
| Rule 8 of Companies (Audit and Auditors) Rules, 2014 | Procedure for resignation |
| Rule 7 of Companies (Audit and Auditors) Rules, 2014 | Removal of auditor before term completion |
Reasons for Auditor Exit
Auditors may exit a company due to the following reasons
Forms Involved in Auditor Exit
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| Form | Purpose | Who Files | Due Date |
|---|---|---|---|
| ADT-1 | Appointment of new auditor | Company | Within 15 days of AGM or Board Meeting |
| ADT-2 | Removal of auditor before term | Company | Within 30 days of Board resolution |
| ADT-3 | Auditor's resignation | Auditor | Within 30 days of resignation |
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Documents Required for Auditor Exit
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Resignation Letter (in case of resignation)
Details of new auditor (PAN, firm reg. no., etc.)
Board Resolution & Special Resolution (in case of removal)
Consent letter and eligibility certificate from new auditor
Form ADT-2 or ADT-3, as applicable
DSC of director/auditor filing the form
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Procedure for Auditor Resignation
If the auditor resigns
If the auditor resigns:
Steps Involved:
- Auditor provides resignation letter to the company.
- Auditor must file Form ADT-3 with ROC within 30 days of resignation.
- Company informs the Board and updates its records.
- New auditor must be appointed if required (Form ADT-1).
Information in ADT-3:
- Reason for resignation
- Whether there were any concerns raised
- Confirmation that no audit fraud was reported
Timelines:
- ADT-3 (by auditor): within 30 days of resignation
ADT-1 (by company): for new appointment within 15 days of AGM or board meeting
An auditor cannot be removed before the expiry of their term without:
- Obtaining approval of the Board of Directors
- Passing a special resolution in a general meeting
- Getting prior approval from the Central Government (via Form ADT-2)
ADT-2 Timeline: File within 30 days from the Board resolution seeking removal.
Required Attachments:
- Board Resolution
- Reasons for removal
- Auditor’s representation (if given)
A casual vacancy can arise due to death, resignation, disqualification, or removal.
Company Type | Who Appoints New Auditor | Timeline |
Other than Govt. Company | Board of Directors | Within 30 days |
Government Company | CAG of India | Within 60 days |
If the casual vacancy is due to resignation, shareholder approval is also needed within 3 months of the board’s appointment.
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Consequences of Non-Compliance
Failing to follow the proper exit procedures can result in
Penalties under Section 140(3): Up to ₹5 lakhs
Auditor disqualification for 5 years (in case of fraud under Sec 143)
ROC Show Cause Notices
Director disqualification for failure to appoint a new auditor
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