Page 389 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

Council Notification: The Council has clarified that Clause (9) compliance involves adhering to the provisions
in Sections 139 and 140.
Sec 139: Section 139 contains various provisions related to the appointment of auditors in different situations.
Sec 140: Section 140 outlines the procedure to be followed when a company wishes to change its auditors.
Appointment Validity: To prevent future disputes or objections from shareholders or outgoing auditors, the
incoming auditor must confirm that the company has faithfully followed the appropriate appointment
procedure.

Appropriate Appointment Procedures.
Auditor's Obligation: The incoming auditor must ensure that the company has complied with the appropriate
procedures for their appointment to avoid future challenges to its validity by shareholder or Retiring Auditor.
Guidelines: Council has issued Guidelines which specifies how incoming Auditor should verify various types of
appointments.
Auditor Appointment Scenarios:
▪ First Auditor: Steps for when the appointed auditor is the first auditor of the company.
▪ Subsequent /Casual Vacancy Auditor: Steps for when the auditor is appointed to replace an existing
auditor who has resigned, been removed, or ceased to hold office for any other Reason.
▪ Joint Auditor: Steps for when one or more joint auditors appointed by the company are not reappointed.
▪ New Auditor: Steps for when one or more auditors appointed by the company were not holding this
office earlier.
Procedure for Changing (Removal of Auditor at AGM Sec 140(4))the Auditor of a Company as per the
Companies Act, 2013
1. Special Notice: If a company member wants to replace the retiring auditor or appoint a different auditor, they
must give a special notice under Section 140(4) of the Companies Act, 2013. This notice is also required if the
member wants to remove the auditor at AGM before their tenure of 5 AGM’s ends.
2. Send copy to retiring auditor: Upon receiving the special notice, the company must send a copy to the
retiring auditor immediately as per Section 140(4) of the Companies Act, 2013.
3. Auditor's Representation: The retiring auditor can submit their representation to the company members
after receiving the notice.
4. Member Notification: The company must send the special notice & Auditor’s representation to its members
at least seven days before the meeting, as per Section 115 read with Section 20 of the Companies Act, 2013.
5. General Meeting: The retiring auditor's representation must be considered at the General Meeting before
passing the resolution proposed by the member. This resolution can only be passed in accordance with Section
114 of the Companies Act, 2013.
"Verification Obligations of the Incoming Auditor
Certificate From Managements: Simply accepting a certificate from the company's management stating
compliance is not sufficient. The incoming auditor must examine the company's relevant records to verify
compliance.
Refusal of Assignment: If the company refuses to allow the incoming auditor to review the necessary records
to confirm compliance, the auditor should decline the audit assignment.
Verification Guidelines for Incoming Auditors.
First Auditor by BOD: If the auditor is being appointed for the first time after the company's incorporation, the
auditor should verify whether the Board of Directors passed the resolution for their appointment within thirty
days of the company's registration.
First Auditor at General Meeting: If the first auditor is being appointed by a general meeting of the company,
the auditor should verify whether a proper notice convening the general meeting has been issued and whether
the resolution has been validly passed.

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