Explain the procedure a company has to follow when changing its auditors. In your discussion explain ‗dismissal‘ and ‗appointment‘ of auditors a company?

Auditing and Assurance Revision Questions and Answers

Dismissal of an auditor refers to the removal of an auditor, which is dealt with Section 160 of the Company‘s Act.

Section 160(1)
A special notice shall be required for resolution at the company‘s AGM appointing as an auditor another person other than a retiring auditor and providing expressly that a retiring auditor shall not be reappointed.

Section 160 (2)
On receipt of the notice of such intended resolution the company shall forthwith send a copy thereof to the retiring auditor if any.

Section 160 (3)
Where a notice is given as a foresight, the retiring auditor will make with respect to the intending resolutions, representations in writing to the company not exceeding a reasonable length and the company shall send this together with the notice of the annual general meeting to all shareholders of the company and to other parties to whom such notice is sent.

Representations may however, not be sent to shareholders if they are received too late for the company to do so or if it is due to the auditors default.

However, the auditor may read such representations at the AGM (Annual general meeting). These representations need not be read at the AGM if on the application of a member or any other aggrieved party, the court is satisfied that the right confirmed on the auditor this sub-section is being used to secure needless publicity for a defamatory matter. In addition the court may order the auditor to pay the cost of such a suit either in part or in whole as the case may be.

Appointment of the auditor

This is dealt with Section 159 of the Company‘s Act. Section 159(1): Appointment at the AGM: –
Every company shall, at its AGM appoint an auditor to hold office from the conclusion of that meeting to the conclusion of the next AGM.

Section 159 (2): Automatic reappointment of the auditor

Not withstanding the provisions of sub-section (1) above, a retiring auditor however appointed shall be automatically reappointed without a resolution being passed unless:-

a) He is not qualified for reappointment
b) A resolution has been passed at that meeting appointing someone else or providing expressly that he or she shall not be reappointed.
c) He has given notice in writing of his unwillingness to be reappointed, provided that prior notice is given of the intended resolution to appoint some other person in place of the retiring auditor.

Section 159(3): Appointment registrar of companies:-

When at an AGM no auditor is appointed or deemed to be reappointed the registrar of companies may appoint an auditor to fill such a vacancy.

Section 159 (5): Appointment of the first auditor:-

As herein provided the first auditors of a company shall be reappointed the directors anytime before the next AGM and the auditor so appointed shall hold office, up to the conclusion of the next AGM provided that:-

Section 159 (5) (1): The company may at an AGM remove such an auditor and appoint in their place any other person who has been nominated for appointment any member of the company not less than 28 days before the date of that meeting.

Section 159(5)(2): If the directors of a company fail to exercise their powers then under this subsection the company will at the AGM appoint the first auditor. Therefore the aforesaid powers of the directors shall automatically cease.

Section 159 (6): States: –
The directors may fill any, casual vacancy in the office of the auditor, but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act.



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