Appointment of auditors
Janak Dalal
(Querist) 15 April 2014
This query is : Resolved
We are a Trust regd in Maharashtra. A resolution was passed in AGM to appoint new Auditors in place of existiong Auditors, who have been auditors since past 5 years. Newly appointed auditors have asked for NOC from the retiring Auditors. They refused to give NOC and asked to clarify why they were removed.
1) My querry is : Have retiring auditors right to ask for clarification?
2) Whether NOC from retiring Auditor is required, when a resolution for appoitment of Auditors was passed in AGM ?
Guest
(Expert) 15 April 2014
You have used two contradictory terms in your description, (1) removed, and (2) retiring. There is a difference between a removed auditor for specific reason and retiring auditor on completion of his term of appointment.
However, clarification to auditor depends upon whether he was appointed for some specific or without mention of period for which appointed. If appointed for specific period no clarification is needed, if retired on completion of his term of appointment. If appointed without specifying period, to remove the auditor that would need appropriate resolution to that effect duly passed by the Board of Trustees and AGM by giving specific reason in the resolution. Before that a notice to that effect would also be desirable to be given to that auditor to apprise him with reason and to give him a chance to represent against the quoted reason.
Otherwise, NOC of the previous auditor is would be necessary for appointment of a new auditor. Passing of resolution in that case is subject to the assent of the auditor
Vidhi Joshi
(Expert) 15 April 2014
agree with dhingra ji
Rajendra K Goyal
(Expert) 15 April 2014
Agree with the expert PS Dhingra ji. Also refer the provisions of trust deed.
Janak Dalal
(Querist) 15 April 2014
Thanks Mr. Dhingra for speedy reply.
Appointment was made without specifying period. But a policy has been adopted by Governing Body to change Auditors every three years. Thats all. There had not been any qualification in Audit Report so far. We passed appropriate resolution to that effect in AGM. Although Notice was not given to the existing Auditor. Dhingraji, my simple question is that newly appointed Auditors can start audit without consent of prev Auditors ? I think this a Trust and as such norms followed in case of Compnay may not be strictly appliocable here. (There is no provn in Trust Deed for appoinement of Auditors).
Pl guide. Thanks in advance
Guest
(Expert) 15 April 2014
Dear Janak,
Provision or no provision in the Trust Deed, audit of accounts of the Trust is a must.
As stated, only unspecific period of appointment and non-issue of notice to the auditor with intimation about the new policy are the major hurdles in appointment of new auditor.
New Auditor cannot start work without NOC of the previous auditor or due termination after process of his termination is not completed.
So, better now convince the existing auditor about new policy of appointment on three years basis and take NOC from him. Of course he can be create great legal problems for the Trust in the absence of due formalities.
Janak Dalal
(Querist) 15 April 2014
Thanks again Dhungraji,
We will do that as suggested by you.
That answers my querry.
Rgds
Guest
(Expert) 15 April 2014
You are welcome.
