The Resignation and the Statutory Report
Section 140(2) requires an auditor who resigns to file a statement in Form ADT-3 with the company and the ROC. The statement must set out the reasons for the resignation and any other facts that the auditor considers relevant. The filing must be made within thirty days of the resignation. The resignation is effective on the date stated in the resignation letter, but the statutory reporting obligation continues.
The Company’s Obligations
The company must convene a board meeting to note the resignation and to appoint a successor auditor, subject to the approval of the shareholders in a general meeting. Where the vacancy is a casual vacancy, the board may appoint the auditor with the approval of the shareholders within three months. The company must file Form ADT-1 for the new appointment.
The ADT-3 Filing
Form ADT-3 is filed by the auditor, not by the company. The company should obtain a copy of the filed ADT-3 and place it before the board. A company that is unaware of the ADT-3 filing has not discharged its oversight obligation. The ADT-3 should be reconciled with the resignation letter and the board minutes.
The Reasons and the Disclosure
The auditor’s statement of reasons is a public document. A resignation that cites “pre-occupation” without further explanation may attract regulatory scrutiny. An auditor who resigns citing concerns about the company’s accounting or governance should ensure that the statement is specific and supported by the audit file. The company should respond to the auditor’s concerns in its board minutes and, where necessary, in a disclosure to the stock exchanges.
The Audit Committee’s Role
The audit committee should review the resignation letter and the ADT-3, and record its assessment of the reasons. The committee should also review whether the resignation is connected to any disagreement on accounting treatment, internal controls, or RPT disclosures. A resignation that follows a disagreement on a significant accounting matter should be disclosed in the board’s report.
The Successor Appointment
The successor auditor’s appointment must comply with Section 139(2) rotation limits and the eligibility criteria. The company should obtain a fresh eligibility certificate and conduct a conflict check. A rushed appointment of an auditor who is disqualified or who has exceeded the tenure cap compounds the compliance problem created by the resignation.
Call to Action: For auditor resignation documentation review, ADT-3 compliance, or successor auditor appointment, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.
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