Change In Auditors

Organizations change their auditors sometimes.  Some of the common reasons that entities might change their auditors are audit fee, size of client or audit firm, auditor does not seek re-election, personality clash and audit rotations.  The two main methods of changing auditors are 1) Resignation of an auditor and 2) Removal of the auditors.

 

1.   Resignation of auditors

During the term of office of auditors they may resign for one or more reasons. The due procedures for the resignation of the auditors are as outlined below:

·         Auditors must deposit written resignation notice together with statement of circumstances relevant to members or statement that no circumstances exist at the registered office of the client;

·         The company must send a copy of the resignation notice package of the auditors to the Registrar of companies;

·         Where the resignation notice package includes statement of circumstances, the company should send a copy of the statement to everyone entitled to receive a copy of accounts;

·         Auditors can require directors to call extraordinary general meeting to discuss circumstance of resignation;

·         Directors must send out notice of meeting within 21 days of having received requisition by auditors.

Although the auditors may have resigned, they have the following rights;

·         To receive notices that relate to a general meeting at which their term of office would have expired;

·         To receive notices that relate to a general meeting where casual vacancy caused by their resignation to be filled;

·         To speak at these meetings on any matter which concerns them as auditors.

 

2.   Removal of Auditors (Section 135)

Section 135 of the Companies Code makes it possible for a company to remove its auditors.  The appropriate procedures for removal of auditors are as follows:

·         A written notice of intention to move a resolution for the removal or appointment of auditors should be given to the company not less that thirty-five (35) days (fourteen (14) days in case of resolution to remove an auditor appointed by the directors) before the annual general meeting;

·         The company should send a copy of the notice to the auditor concerned;

·         The notice of the resolution should be given to members not less than twenty –one (21) days (Seven (7) days in case of resolution to remove an auditor appointed by the directors) before the meeting;

·         The auditors concerned are entitled to be heard on the resolution at the meeting;

·         The auditors are entitled to send to the company a written statement, copies of which the company shall circulate to every person entitled to notice of meeting in the same manner as notice of meetings are required to be given;

·         The company need not circulate the statement of the auditor if it is received by the company less than Seven (7) days before the meeting or the Court orders non-circulation.

·         If the resolution is passed it shall take effect after the conclusion of the meeting.

 

 

Please visit us on facebook to download this lecture note.

Do not forget to leave your comments below.


<< Previous Lesson                                                                          Next Lesson >>