You are an engagement manager for an audit team for M/s Sun Life Ltd. for financial statements as on Ashadh 31, 2073. Your team is about to drafting management letter after all transaction testing and review; the board of director of M/s Sun Life Ltd. has appointed new CEO. After assuming his office, he decided to change few general managers and auditor for FY 2072-73 with immediate effect.
As per provision contained in Section 119 of companies Act 2063 relating to removal of appointed auditor, no auditor appointed pursuant to Companies Act shall be removed pending the completion of audit of accounts of any financial year for which he/she was appointed as the auditor.
However, if any auditor breaches the code of conduct of auditors or does any act against the interest of the company which has appointed him as the auditor or commits any act contrary to the prevailing law, such auditor may be removed through the same process wherehe/she was appointed as auditor, giving prior information to the Nepal Chartered Accountants Institute, and with the approval of the regulatory authority, if any authorized the prevailing law for the regulation of business of the company concerned , and failing such authority, with the approval of the Office of company registrar.
In case of M/s Sun Life Ltd, CEO is not the person to appoint and remove statutory auditor and the actions taken the CEO is null and void and additionally, an appropriate communication to those charged with governance is required.