How an Auditor Appointed, Reappointed, and Removed in a Company?
Appointment of the Auditor:
Every company shall, at each Annual General Meeting, appoint auditor’s to hold office from the conclusion of that meeting until. the conclusion of the next annual general meeting, and shall, within seven days of the appointment give intimation thereof to every auditor so appointed. Ordinarily, the power to appoint the auditors lies with the shareholders of the company in general meeting.
Only in exceptional circumstances can the appointment be made by the board, such as, appointment of the first auditors, or auditors to fill the casual vacancy or appointment by the Central Government (Where the company has failed to exercise its power to appoint).
Reappointment of the Auditor:
Ordinarily, at any Annual General Meeting the retiring auditor shall automatically be reappointed. Neither the board nor the shareholders can refuse to appoint him. But in the following cases, the retiring auditor shall be appointed: If he is mat qualified for reappointment, If he has given the company a notice in writing of his unwillingness to be reappointed,
If a resolution has been passed at the meeting to appoint somebody else or to provide expressly that he shall not be reappointed or If a notice has been given of any resolution proposing the appointment of some other person in the place of the retiring auditor. appointment of the retiring auditor shall also not be made if he is already holding auditor-ship in the specified number of companies.
Removal of the Auditor:
The first auditor of the company appointed as the directors prior to the first Annual General Meeting may be removed by the shareholders in general meeting, even before the completion of the tenure.
An auditor is appointed by the members of the company in the annual general meeting till the conclusion of the next Annual General Meeting. In the next annual general meeting the members have the right to appoint another auditor in place of the previous auditor. For this a special notice is required for the resolution at an Annual General Meeting appointing another person as an auditor other than a retiring auditor.
Thus, an auditor can be removed even before the expiry of his term. All cases of removal before the expiry of the term are to be dealt according to the provisions of Section 225 of the Companies Act, 1956 i.e. removal is to take place in the general meeting and the removal is to take place after the approval of the Central Government.