101. Casual vacancy of auditor.

Casual vacancy of auditor arises due to the reasons such as              Disqualification of the auditor; or             Death; or              Resignation. Appointment of Statutory auditors is the exclusive right of the members of the company. That is, the Board of Directors has no right to appoint auditors to the company. But Section 224(6) of the Companies Act, 1956 allows the Board to fill the casual vacancies of auditors except the casual vacancy due to resignation of the auditor. Proviso to this Section empowers the members to fill a casual vacancy of auditor due to resignation of the auditor.

The auditor appointed by the Board in casual vacancy can continue till the conclusion of next AGM.

In a situation, where no auditor is appointed by the members at the General Meeting, then the right to appoint auditor goes to Central Government. Such a vacancy cannot be filled by the Board and such a vacancy cannot be treated as “casual vacancy”.

Similarly, if the appointed auditor refuses to accept the appointment, it cannot be treated as casual vacancy. In such a case fresh appointment at General Meeting is essential.

A sample ordinary resolution to be passed at a General Meeting for filling the casual vacancy of auditor.( No special resolution is required and hence no need to file form 23)

“RESOVED that M/s ABC, the Chartered Accountants (Firm Regn. No. ___________) , be and are hereby appointed as auditors of the company to fill up the casual vacancy caused by the resignation of M/s XYZ, Chartered Accountant, until the conclusion of the next Annual General Meeting of the Company at a remuneration as the Board of directors may determine”.

Procedure for appointing auditors in casual vacancy due to the resignation of the Auditor

1.   Hold Board Meeting to consider the proposal for appointing auditor in casual vacancy due to the resignation of the Auditor. In the same meeting approve the draft notice of EGM for passing ordinary resolution for appointment of auditor. 2.   Before appointment obtain a letter from the new auditor u/s 224(1B). 3.   Hold EGM & pass an ordinary resolution. 4.   Intimate the auditor about his appointment with 7 days. 5.   Auditor so appointed shall file Form 23B with MCA within 30 days of appointment.