An auditor is an independent professional person who is qualified to audit a company’s financial statements.
The following is a brief note on the statutory requirements on the appointment, resignation or removal of an auditor.
The first auditor of a company would usually be appointed by the directors, or alternatively the shareholders may appoint the auditor at the first Annual General Meeting (“AGM”).
Auditors are appointed at the AGM and hold office from the conclusion of the AGM to the conclusion of the next AGM. A retiring auditor shall be re-appointed without any resolution being passed unless:
- He is not qualified for re-appointment;
- A resolution has been passed at that meeting appointing somebody instead of him or providing expressly that he shall not be re-appointed; or
- He has given the company notice in writing of his unwillingness to be re-appointed.
Resignation & Removal
Where an auditor ceases to hold office either by resignation or removal, the auditor and the company is obliged under Regulation 62 of SI No. 220 of 2010 (European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010 to notify the Irish Auditing and Accounting Supervisory Authority (“IAASA”) within one month of the date of cessation.
When an auditor resigns before the end of their term or state that they do not wish to be reappointed, they must explain this in a notice to the Companies Registration Office (“CRO”) within 14 days. Under Section 185 (1) of the Companies Act 1990, the notice should state whether there are any circumstances connected with their resignation which should be brought to the attention of the company’s members or creditors. This notice is made public.
If there are circumstances which the auditor considers should be brought to the attention of the company’s members or creditors of the company, the company must, within 14 days either send a copy of the notice to all those who are entitled to receive copies of the statutory accounts, or apply to the court for relief from such requirement.
Where the auditors’ notification specifies that there are no such circumstances, it must be accompanied by a statement of the reasons for the auditors’ resignation.
When an auditor is being removed from office, they have the right to require the directors of a company to convene an Extraordinary General Meeting (“EGM”) of the company to consider the circumstances of removal. The auditor also has the right to make written representations to the company and require their circulation to the members and others who have a right to receive notice of the EGM.
The IAASA must be provided with a copy of the resolution removing the auditor and a copy of any representations made to the company which were provided to the company members. Notice of removal of an auditor must also be notified to the CRO on a Statutory Form H3 within 14 days of the resolution being passed.
There are exceptions to the requirement to notify IAASA on cessation of office by an auditor where the cessation of office by an auditor is due to a company:
- Becoming audit exempt;
- Being liquidated; or
- Being struck off the Companies’ Register.
Grounds For Auditor Removal
There must be substantial grounds for removing an auditor and the removal has to be in the best interests of the company which does not include any illegal or improper motive with regard to avoiding disclosures or detection of any failure to comply with the Companies Acts.