As per the Companies Act, 2013 (“Act”), every company must appoint an auditor to oversee and maintain its financial records. The audit report prepared by an auditor is a crucial document that ensures financial transparency. Therefore, companies are required to appoint an auditor at their first Annual General Meeting (AGM).
Both individuals and firms can be appointed as auditors, provided they give their written consent for the role. Once appointed, the company must inform the Registrar of Companies (ROC) about the appointment within 15 days.
However, an auditor has the right to resign from their position. If they choose to do so, they must follow the resignation process outlined in the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014.
Resignation Process Under the Companies Act, 2013
Filing Resignation with the Registrar
According to Section 140(2) of the Act, an auditor must submit a resignation statement to the ROC within 30 days of resigning. If the company is a government-owned entity, the statement must also be filed with the Comptroller and Auditor-General of India.
The resignation statement must include the reasons for stepping down and any other relevant information. Failure to file this statement results in penalties under the Act.
Penalties for Non-Compliance
If an auditor fails to submit their resignation statement, they will be liable to a penalty of ₹50,000 or an amount equal to their remuneration, whichever is lower. Additionally, if the delay continues, a further penalty of ₹500 per day may be imposed, with a maximum cap of ₹5,00,000.
Procedure for Resignation
Application for Resignation (Form ADT-3)
As per the Companies (Audit and Auditors) Rules, 2014, an auditor must submit Form ADT-3 to officially notify their resignation.
Steps to File Form ADT-3:
- Visit the MCA Portal – The auditor can file the form online through the Ministry of Corporate Affairs (MCA) website.
- Complete the Form – The auditor must provide company details, auditor’s credentials, and reasons for resignation.
- Attach Supporting Documents – A resignation letter should be attached to the form.
- Submit the Form – Once completed, the form must be submitted digitally, with the applicable fee.
Board Meeting and Appointment of a New Auditor
Once the auditor resigns, the company must convene a board meeting to formally acknowledge the resignation. The company must then appoint a new auditor in accordance with the Act.
In urgent cases, a casual auditor may be appointed within three months through a general meeting. This interim auditor will serve until the next AGM, where a permanent auditor is appointed.
For government companies, the Comptroller and Auditor-General of India will appoint a new auditor within 30 days of the resignation.
Contents of Form ADT-3
The auditor must fill in the following details when submitting Form ADT-3:
- Corporate Identification Number (CIN) of the company
- Company name, registered address, and email ID
- Auditor’s category (Individual or Firm)
- PAN and Membership Number of the auditor/auditor’s firm
- Auditor’s address and contact details
- Reasons for resignation
- Any additional relevant facts
- Digital signature of the auditor
- Resignation letter (if applicable)
Fees for Filing Form ADT-3
The filing fee for Form ADT-3 depends on the company’s nominal share capital:
| Nominal Share Capital | Fee (₹) |
| Less than ₹1,00,000 | 200 |
| ₹1,00,000 – ₹4,99,999 | 300 |
| ₹5,00,000 – ₹24,99,999 | 400 |
| ₹25,00,000 – ₹99,99,999 | 500 |
| ₹1,00,00,000 or more | 600 |
If Form ADT-3 is submitted beyond the 30-day deadline, an additional late filing fee applies, depending on the delay period.
FAQs on Auditor Resignation
1. Can an auditor resign from a company before their term ends?
Yes, an auditor can resign before their term expires by submitting a resignation letter to the company and filing Form ADT-3 with the ROC.
2. What happens if an auditor does not file Form ADT-3?
Failure to file Form ADT-3 within 30 days can result in penalties, including a fine of ₹50,000 or an amount equal to the auditor’s remuneration, whichever is lower.
3. Who appoints a new auditor after resignation?
The company must appoint a new auditor in its next Annual General Meeting. In the case of government companies, the Comptroller and Auditor-General of India will appoint a replacement within 30 days.
4. Is there a specific format for an auditor’s resignation letter?
There is no mandatory format, but the resignation letter should include the reason for resignation and any relevant details.
5. Can an auditor be reappointed after resigning?
Yes, an auditor can be reappointed later, provided they meet all eligibility criteria and comply with regulatory requirements.
