How should you deal if Auditor resigns without Auditing the books of accounts?
How should you deal if Auditor resigns without Auditing the books of accounts?
If a companies auditor resigns without auditing the financial statements of a company, a casual vacancy arises. The company should fill this casual vacancy by following section 139 of the companies act and within 30 days of arising of the casual vacancy. In this study, we shall discuss what happens when the company cannot fill the casual vacancy within the time frame specified in the companies act. Our main objective is to discuss how the company can fill the casual vacancy after the said time frame by incurring the least amount of expenses in terms of fines and penalties.
At first, please understand that it is very easy to appoint. So you shouldn't panic.
Let's understand through an example
Understanding through a case -
M/s Sapna Private Limited is a small company. I will call it SPL.
SPL appointed M/s Ravi and Co (or Ravi, in short) as their statutory auditors in their 5th Annual General meeting for 5 years on Sep 30 2016.
So Ravi should audit the financial statements of SPL from 1 April 2017 until 31st March 2022.
However, Ravi resigned on 31 March 2017. He didn't audit the accounts for year 2016-17 even.
What should SPL do now?
If an auditor resigns in the middle of his tenure then a casual vacancy is created in the office of auditor. This vacancy should be filled by directors in 30 days. This appointment of auditor should be ratified by shareholders in 90 days of appointment. - Section 139.
SPL should understand that -
- Their directors should appoint an auditor before 30 April 2017.
- SPL should call shareholders meeting before 29th of July 2017.
- The shareholders should ratify the appointment of auditor
