When Your Statutory Auditor Resigns: ADT-3, Casual Vacancy and the New Auditor
What happens when a company auditor resigns: ADT-3 by the auditor in 30 days, the board filling the casual vacancy, member approval in three months, and ADT-1.
When a statutory auditor resigns, three things follow. The auditor files Form ADT-3 with the Registrar within 30 days, giving the reasons. The resignation creates a casual vacancy, which the board fills within 30 days. Because the vacancy was caused by a resignation, the board's appointment must then be approved by the members at a general meeting within three months of the board's recommendation, and the new auditor holds office until the next AGM.
Companies usually face this mid-year, when an auditor retires from practice, merges into another firm, or the relationship ends. This guide sets out the steps in order and the points that differ from removing an auditor.
The steps and deadlines
| Step | Who | Deadline | Law |
|---|---|---|---|
| Resignation letter to the company | Outgoing auditor | When resigning | Section 140(2), Companies Act, 2013 |
| File ADT-3 with reasons | Outgoing auditor | Within 30 days of resigning | Section 140(2) |
| Fill the casual vacancy | Board | Within 30 days | Section 139(8) |
| File ADT-1 for the new auditor | Company | Within 15 days of the board meeting | Rule 4(2) |
| Approve the appointment | Members at a general meeting | Within three months of the board recommendation | Section 139(8) |
| New auditor holds office | New auditor | Until the conclusion of the next AGM | Section 139(8) |
A company audited by the Comptroller and Auditor-General follows a different route: the C&AG fills the casual vacancy. The steps here are for ordinary private and public companies.
Before the board meeting
- Get the resignation letter and check the effective date and the reasons given.
- Choose the incoming auditor and obtain their written consent and an eligibility certificate under Section 141.
- Professional courtesy: the incoming chartered accountant communicates with the outgoing auditor before accepting, as the profession's rules require; give both sides the contact details early.
- Records: arrange the handover of the previous year's audit file references and working schedules the new auditor will need.
Resignation vs removal vs not reappointing
| Route | When it applies | Approvals |
|---|---|---|
| Resignation | The auditor chooses to leave | Board fills the vacancy; members approve within three months |
| Removal before the term ends | The company wants the auditor out mid-term | Special resolution and prior Central Government approval (application in ADT-2); the auditor must be given a reasonable opportunity of being heard |
| Not reappointing at the end of the term | The five-year term ends at an AGM | Members appoint a new auditor at the AGM; a special notice is needed to appoint someone other than the retiring auditor |
Asking an auditor to resign so that the company can avoid the removal process is a common shortcut, and a risky one: the auditor's reasons in ADT-3 are on the public record. If the relationship has broken down, take advice on the right route first.
Common mistakes
- Assuming the company files ADT-3. The resigning auditor files it; the company files ADT-1 for the new auditor.
- Missing the three-month window for members to approve the casual vacancy appointment.
- Appointing the new auditor for five years at the board meeting. A casual vacancy appointment lasts only until the next AGM.
- Leaving the vacancy open until the year end, which delays the audit and the annual filings.
For the first auditor of a new company, see first auditor appointment and ADT-1. For the audit itself, see our statutory audit guide.
Frequently asked questions
Q: Who files ADT-3 when an auditor resigns?
A: The resigning auditor files ADT-3 with the Registrar within 30 days of resigning, stating the reasons. The company does not file ADT-3.
Q: How soon must the board appoint a new auditor after resignation?
A: Within 30 days. Because the vacancy arose from a resignation, the members must approve the appointment at a general meeting within three months of the board's recommendation.
Q: How long does an auditor appointed in a casual vacancy hold office?
A: Until the conclusion of the next annual general meeting, when the members appoint an auditor for a regular term.
Q: Is ADT-1 filed for a casual vacancy appointment?
A: Yes. The company files ADT-1 within 15 days of the meeting at which the new auditor is appointed.
Q: Can a company remove its auditor instead?
A: Yes, but removal before the term ends needs a special resolution and prior Central Government approval, applied for in ADT-2, and the auditor must be given a chance to be heard.
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