Change of Auditor Service
Starting from ₹1,500 + GST
Table Of Content
Auditor Change in India
Changing an auditor is a significant decision for any company, as it directly impacts the integrity, transparency, and accuracy of financial reporting. In India, this process is regulated by the Companies Act, 2013 and the guidelines set by SEBI (for listed companies), which mandate auditor rotation to maintain independence and avoid conflicts of interest. Auditor changes may be necessary due to various reasons such as regulatory requirements, resignation, disqualification, business growth, or conflicts between management and the auditor. Additionally, a fresh perspective from a new auditor can identify errors, suggest improvements in financial controls, and ensure compliance with legal obligations. Ultimately, the process of changing auditors ensures that the company’s financial reporting remains transparent, compliant, and free from potential biases.
Why Auditor Change is Needed
Legal and Regulatory Requirements for Auditor Change
Process of Changing the Auditor in India
Step 1
The company’s board of directors must convene to discuss and approve the decision to change the auditor. A formal board resolution is passed to authorize the initiation of the auditor change process.
Step 2
Once the decision to change the auditor is approved, the company must obtain consent from the new auditor. This consent is formalized through a written agreement, ensuring compliance with statutory regulations.
Step 3
The company must file Form ADT-1 with the Registrar of Companies (RoC) within 30 days of appointing the new auditor. This filing is a mandatory requirement under the Companies Act, 2013, to officially notify the regulatory authority of the change.
Step 4
The existing auditor must formally resign, and a resignation letter should be submitted to the RoC, following the guidelines of the Companies Act. The resignation enables the fresh appointment process to begin.
Step 5
After completing the necessary procedures, including shareholder approval (if required), the new auditor is formally appointed. The appointment is finalized once the RoC has been notified, ensuring no gap in the audit process.
Documents Required for Auditor Change
FAQs
What is the process of changing an auditor in India?
The process involves approval from the board of directors, obtaining consent from the new auditor, filing Form ADT-1 with the RoC, and completing any necessary shareholder approvals.
What are common reasons for an auditor change?
Auditor changes may occur due to resignation, disqualification, the mandatory rotation policy, or conflicts of interest between the auditor and the company.
What happens if an auditor resigns?
If an auditor resigns, the company must notify the RoC and initiate the process to appoint a new auditor in compliance with the Companies Act.
What is the auditor rotation policy?
The auditor rotation policy mandates that auditors (individuals) must be changed every five years, and audit firms every ten years, to maintain independence and transparency.
Is shareholder approval required for an auditor change?
Shareholder approval is mandatory for certain types of companies, particularly listed entities, as part of the regulatory framework for auditor appointments.
How can I notify the RoC about an auditor change?
You must file Form ADT-1 with the RoC within 30 days of appointing a new auditor to officially notify the authorities.
What is the cost of changing an auditor?
The cost of changing an auditor depends on the fee structure of the new audit firm and the associated regulatory filing costs.
Can a company change its auditor before the mandatory rotation period?
Yes, a company can change its auditor before the rotation period if there are legitimate reasons such as resignation, disqualification, or conflict of interest.
What is Form ADT-1?
Form ADT-1 is the official document filed with the RoC to notify them about the appointment of a new auditor, a mandatory requirement under the Companies Act.
What are the penalties for not complying with the auditor change regulations?
Non-compliance with the auditor change regulations, such as failing to rotate auditors or file the necessary forms, can result in fines and penalties imposed by the regulatory authorities.