An auditor, before accepting the appointment in place of an auditor who has resigned should verify that the resolution appointing him as the auditor at the general meeting was duly moved and approved by the shareholders. In addition, he should refer to the resignation submitted by the previous auditor and
also communicate with him so as to ascertain:
- the circumstances which led upto his resignation; and
- whether there exist any circumstances on account of which he should not accept the appointment.
(1) Though there is no provision in the Act for an auditor ceasing to hold office on becoming bankrupt or insane, it will not be possible for a person of unsound mind or an undischarged insolvent to hold such office as he will not, under sections 8 and 20 of the Chartered Accountants Act, 1949, have his name on the Register of Chartered Accountants.
(2) In the case of appointment of an auditor to act jointly with an existing auditor, the procedure would be similar to that where the existing auditor is being removed (as discussed hereinafter). In practice, however, compliance with the formalities would not give rise to any difficulties since the existing auditor’s consent to the proposal, it is expected, will have been secured in advance.
(3) Although the appointment of an auditor is made annually, it has been generally felt that there should, as far as possible, be continuity of appointment to secure the auditor’s independence. It would not be possible, so long as he is not protected against being penalized by removal, for him to make an adverse criticism of the accounts produced by the directors. On this consideration, a provision has been made for his normal re-appointment by the company in a general meeting; also for the casual vacancy, caused by the resignation of an auditor, to be filled by the shareholders.