Question ID :
44803
Removal of Auditor
We have been appointed as a Statutory Auditor in a company for 5 years. The Company went into CIRP process. The Resolution Professional has removed us even though our term were not completed and appoint another auditor. Our fees were outstanding and thats why we have not given NOC to the incoming auditor. The incoming auditor has accepted the audit without our NOC. Can the incoming auditor accept the audit without the NOC of previous auditor when the company is in NCLT.
Posted by
manoj sethia
on
Feb 26, 2025
Filed Under
AUDIT
As per ICAI guidelines and professional ethics, an incoming auditor generally requires a No Objection Certificate (NOC) from the outgoing auditor before accepting an audit engagement. However, in cases where a company is under the Corporate Insolvency Resolution Process (CIRP) and governed by the National Company Law Tribunal (NCLT), the appointment and removal of auditors are subject to the Insolvency and Bankruptcy Code, 2016 (IBC) and directions of the Resolution Professional (RP).
Key Points:
Authority of Resolution Professional (RP): Under CIRP, the RP has the power to appoint or remove an auditor as per the provisions of the IBC, overriding the normal appointment process under the Companies Act, 2013.
NOC Requirement: In normal circumstances, the incoming auditor is required to obtain an NOC from the previous auditor before accepting the engagement. However, in CIRP cases, if the RP has validly removed the previous auditor and appointed a new one, the requirement for an NOC may not apply.
Outstanding Fees: The non-payment of audit fees cannot be a ground for withholding NOC in CIRP cases, as outstanding fees become part of the claims in the CIRP process.
ICAI Ethical Standards: ICAI's Code of Ethics allows an incoming auditor to accept an audit without an NOC if there are exceptional circumstances, such as legal or regulatory constraints.
Conclusion:
In this scenario, the incoming auditor can accept the audit engagement without an NOC from the outgoing auditor if the appointment has been made by the RP under the CIRP process and is approved by NCLT.
Posted by
CA. JHA SHANKAR KUMAR on
Feb 27, 2025
Answer ID :
85719
Since IB Act Supersede all the other Act applicable in india, one must have to check the powers of RP and the terms of His/Her Appointment.
Posted by
HARJEET on
Mar 07, 2025