CS The New ERa - By CS DK

Write Up On Casual Vacancy in the Office of Statutory Auditor, Cost Auditor and Internal Auditor

BY 

CS K VINOTH AND CS D HEM SENTHIL RAJ

STATUTORY AUDITOR

Concept of Casual Vacancy in the Office of Statutory Auditor:

In simple terms“casual vacancy” means an unlikely event or occurrences that happen during the tenure of the Statutory Auditor, which prohibits them to continue or to hold the office in the position of Statutory Auditor. 

Some of the major unlikely events or occurrences:

•      Death in case of an Individual.
•      Resignation before the expiry of the term.
•      Disqualification under Section 141 (3) of Companies Act, 2013.
•      Disqualified under the rules and regulations of the Chartered Accountant Act, 1949.

Steps Involved In Filling the Casual Vacancy:

The Companies Act, 2013 does not discriminate the applicability of the provisions relating to Casual Vacancy for both Public and Private Limited Companies. However, the Act specifies the same set of procedures to be followed by both Public and Private Limited companies, which are tabulated below for better understanding.

S.No	Particulars	Documents to be placed	D	AC	D	BM	D	GM
01	Take note of Statutory Auditor Resignation	Resignation Letter	30	Yes	30	Yes	NR	NR
02	Recommendation for appointment, remuneration and terms of appointment of auditors to Board members.	Willingness letter to act as statutory auditor. Certificate under Section 141 of Companies Act, 2013. List of cases in the name of firm or Individual.	30	Yes	NR	NR	NR	NR
03	To fill casual vacancy in the office of Statutory Auditor	Recommendation given by audit committee.	NR	NR	30	Yes	NR	NR
04	Approval of member in case of casual vacancy due to resignation	Notice to be sent to the members.	NR	NR	NR	NR	3 M	Yes

                       D – Days                         AC – Audit Committee          M - Month

                    BM – Board Meeting        GM – General Meeting           NR – Not Required

Key Points To Note:

·         Member’s approval is not required to fill the casual vacancy arising other than due to resignation.

·         Circular resolution(s) can be passed both in case of Audit Committee and Board Meeting.

·      Casual Vacancy can be filled by passing an ordinary resolution in the General Meeting in case of vacancy arises due to resignation.

·     Auditor filling the casual vacancy can hold the office till the conclusion of the next Annual General  Meeting.
   
    Committee approval is not required for those companies who are exempted under Section 177 of Companies Act, 2013.

 “Important Queries:

 In case of a company having joint statutory auditors, whether resignation of any one of the  statutory auditor will result to casual vacancy?

     

       Solution:

    

      There are no specific provisions governing the casual vacancy of Joint Statutory Auditors under the Companies Act, 2013, as well as the erstwhile Companies Act, 1956.

     

    In the above cited query, any one of the statutory auditor has withdrawn or resigned from the position as statutory auditor, it amounts to casual vacancy pursuant to the provisions of Section 139(8)(i) of CA, 2013, and hence the filling up of such casual vacancy shall be made by the Board within 30 days from the date of resignation and such appointment is subject to the approval of the members at the General Meeting within 3 months of the recommendation of the Board.

    What are the consequences and the remedies available to a listed company if such casual vacancy arises at the time of filing limited review/unaudited or audited quarterly report to be approved by the company?

       Solution:

       In case of Joint Auditors:

    

      The Company shall approve and file the limited review/unaudited or audited quarterly report with the stock exchanges, wherein one of the statutory auditor who continues shall certify the same, provided an explanatory statement shall be annexed in the notes stating the reasons for such casual vacancy arisen at the interim period of the office of the statutory auditor. And the company shall also state that, it shall fill such casual vacancy as per the provisions of the Act within the stipulated time period.

      In case of Single Auditor:

     The Company shall intimate the stock exchange for any such casual vacancy arising in the office of statutory auditor.

      During the interim period, the company shall fill the casual vacancy by the Board which is subject to the approval of the shareholders at the general meeting, however the new statutory auditor shall certify the limited review/un-audited or audited quarterly results as the case may be.

     Whether the term of filling the casual vacancy will be counted in the total tenure of 10/5 years available to a Statutory Auditor?

      Solution:

      Yes it will be counted in the total tenure of 10/5 years as the case may be.

      Compliances Required under the Companies Act, 2013:

S.No	E-form	Purpose	Attachments	To be filed by	Time Limit
01	ADT-3	Notice of Resignation by the  Auditor.	Resignation Letter	Statutory   Auditor	Within 30 days
02	ADT-1	Notice of Appointment of Auditor by the company.	Extract of board Resolution, in case of resignation Notice and extract of General Meeting.	Company	Within 15 days

         Intimation to Stock Exchange(In case of Listed Entities):

            On Receipt of Resignation Letter from Statutory Auditor.
            Notice of Audit Committee and Board Meeting to fill such casual vacancy.
                Outcome of Board Meeting with calling of General Meeting details.
                 Intimation of Cut – Off date and Appointment of Scrutinizer for the purpose of e-voting
            Dispatch of six sets of notices to all the stock exchanges where the company’s shares are listed.                             Newspaper Advertisement for e-voting to shareholders before 6 days of e-voting date.
           Outcome of General Meeting along with the voting results.
.               Report to Stock exchange as per clause 35A format of the Listing Agreement.

  Updations on the Company’s Website:

         

                  Notice of General Meeting.

                  E-Voting procedure.

                Scrutinizer Report

COST AUDITOR

     Central government (CG) has directed certain industries/sectors as specified in the Companies (Cost Accounting Records) Rules, 2014 for compulsory maintenance of cost records as per the rules and those companies shall file a compliance report on maintenance of cost records which shall be obtained from a Cost Accountant in practice on a yearly basis.

      Similarly the CG has also directed certain specified industries/sector to get its Cost Records audited by a Cost Accountant in practice pursuant to Companies (Cost Audit) Rules 2014. The following are the compliances required under Companies Act, 2013 in case of any casual vacancy arises in the office of Cost Auditor.

S.No	Particulars	Documents to be placed	AC*	BM	GM
01	Take note of Cost Auditor Resignation.	Resignation Letter	Yes	Yes	NR
02	Recommendation for appointment, remuneration and terms of appointment of cost auditor to Board members.	Willingness letter to act as cost auditor.     Certificate under section 141 of Companies Act, 2013.       List of cases in the name of firm or Individual.	Yes	NR	NR
03	To fill casual vacancy and to recommend remuneration for members ratification.	Recommendation given by audit committee.	NR	Yes	NR
04	Ratification of Remuneration payable to cost auditor.	Notice of general meeting to be sent to the members.	NR	NR	Yes

     

             Committee approval is not required for those companies who are exempted under Section 177 of Companies Act, 2013.

                     Points To Note:

• ·         Circular resolution(s) can be passed both in case of Audit Committee and Board Meeting.
• ·         Ratification of remuneration payable to Cost Auditor to be done in ensuing General Meeting.
• ·        Companies Act, 2013 does not specify any provisions relating to casual vacancy in the office of Cost                 Auditor,However Cost Audit Rules specify the procedures for filling up of casual vacancy in the           office of cost auditor

                       Compliance Required under Companies (cost records and audit) Rules, 2014:

·                           E-form CRA – 2* – Form of intimation of appointment of Cost Auditor by the Company to Central                                                      Government.

                                      *CRA – 2 is not available in the MCA portal, however the company can be file the board extract with 
                                respective ROC  with e-form GNL – 2 (Information to ROC) till e-forms are made available in the MCA                                                                                    portal along with filled in scan copy of CRA-2.

INTERNAL AUDITOR

       Section 138 of the Companies Act, 2013 has mandated that certain classes of companies as prescribed under the Companies (Audit & Auditors) Rules 2014 to appoint an internal auditor to conduct internal audit of the books of accounts of the Company.

   

    The Internal Auditor shall be a qualified chartered accountant, cost accountant or such other professional as may be decided by the Board.

      Compliance under Companies Act, 2013:

      The Board shall appoint the internal auditor pursuant to section 138 of the Companies Act, 2013.

     The necessary E-Form MGT 14 shall be filed with the ROC along with the copy of Board resolution for such appointment on or before 30th September for the current financial year.

In case casual vacancy arises in the office of the Internal Auditor:

Any such casual vacancy arising in the office of the Internal Auditor shall be filled by the Board of Directors of the Company within a reasonable time at their Board Meeting.


      
       BY 

       CS D HEM SENTHIL RAJ 

       CS K VINOTH