Removal and Resignation of Company Auditor in Singapore
All companies incorporated in Singapore are required to appoint a company auditor, save for certain companies such as small companies and dormant companies.
A company is considered a “small company” if it is a private company throughout the current financial year, and satisfies any 2 of the following for each of the 2 financial years immediately after the current financial year:
- Its revenue does not exceed $10 million;
- The value of its total assets does not exceed $10 million; and/or
- It does not have more than 50 employees.
On the other hand, a company is considered “dormant” during a period where no accounting transaction occurs.
A company auditor may be a public accountant or an accounting entity approved by the Accounting and Corporate Regulatory Authority (ACRA). Generally, a company auditor reports on whether the company’s financial statements comply with financial reporting standards, and provides a true and fair view of the company’s financial position and performance.
This article discusses the removal and resignation of a company auditor from a company in Singapore.
Removal of a Company Auditor
According to section 205(4) of the Companies Act, a company auditor may be removed by resolution of the company at a general meeting for which a special notice has been given. The resolution will only be effective if a notice of the intention to move it has been given to the company at least 28 days before the date of the general meeting.
The company’s obligations upon the removal of its auditor
Immediately after the removal of a company auditor, the company must provide written notice of the same to ACRA.
Further, during the same meeting where a company auditor is removed, the company may appoint another accounting entity nominated at the meeting as auditor, by a resolution passed by the majority (i.e. at least 75% of votes in favour of appointment).
Alternatively, the meeting may be adjourned to sometime between 20 to 30 days after the general meeting. Then when the meeting is resumed, the company may appoint another accounting entity as auditor, by an ordinary resolution, provided that the company has received notice of the nomination of this new auditor at least 10 days before the date of the resumed meeting.
If the company does not appoint a new auditor during the same meeting, ACRA may appoint an auditor.
If the above obligations are not complied with, the company and all its directors will be guilty of an offence and if convicted, may be ordered to pay a fine of up to $5,000.
Resignation of a Company Auditor
The process involving the resignation of a company auditor differs for a public interest company and a non-public interest company. Generally, public interest companies include those:
- Listed or in the process of listing on the Singapore Exchange or a securities exchange outside of Singapore;
- Selected financial institutions (E.g. if the company is a bank licensed under the Banking Act), and
- Large charities or institutions of public character which are companies.
Procedure for auditors of a non-public interest company
An auditor of a non-public interest company may resign by simply providing the company with a written notice of resignation.
Upon which, the auditor’s term of office officially ends either at the end of the day on which notice is given, or at a specific time provided in the notice (if any). The company is then required to lodge a notification of this resignation with ACRA within 14 days of the giving of the notice.
Procedure for auditors of a public interest company
An auditor of a public interest company or a subsidiary of a public interest company may only resign before the end of their term of office if the auditor has obtained consent from ACRA for the resignation.
The relevant application form to seek ACRA’s consent to resign may be submitted to ACRA, together with supporting documents (e.g. evidence of health conditions etc), and a fee of $200 via cheque made payable to ACRA.
In particular, the application for consent must contain a written statement of reasons for resignation. Further, the application must also state whether the auditor has any disputes with the company’s management, and any other matters which may affect the independence of the audit process.
Additionally, when this application is made, the auditor must provide the company with written notice that such an application has been made, together with the same written statement of reasons for resignation.
Thereafter, if everything is in order, ACRA endeavours to provide the applicant with an outcome within 2 weeks.
Generally, consent will only be granted in exceptional circumstances where the auditor is unable to continue performing an audit competently, or where it is impractical or inappropriate for the auditor to perform his job. This is due to the public interest implications that come with auditors resigning from a public interest company.
Some examples which may be acceptable to ACRA would be the failing health of a sole proprietor auditor, loss of independence, or change in auditor stipulated by the company’s parent entity which is audited by another auditor. However, these examples are merely guidelines and the grant of consent is still up to ACRA’s discretion.
If consent is granted, the auditor would have to give the company a written notice of resignation. However, if consent is not granted, the auditor is required to continue to hold office as the company auditor.
The resignation of an auditor of a public interest company or a subsidiary of a public interest company takes effect on one of the following days, whichever occurs last:
- The day specified in the notice of resignation (if any)
- The day when ACRA notifies the auditor and the company of its consent to the resignation
- The day fixed by ACRA for the auditor’s resignation (if any).
The company’s obligations upon the resignation of its auditor
For both public interest and non-public interest companies, upon the successful resignation of a company auditor, the directors of the company are required to call a general meeting within 3 months to appoint a new auditor. Upon appointment of this new auditor, the directors must lodge a notification of the appointment to ACRA within 14 days.
If the directors fail to appoint a new auditor, any member of the company may write to ACRA to apply for it to appoint a new auditor.
Similarly, if the above obligations are not complied with, the company and all its directors will be guilty of an offence and if convicted, may be ordered to pay a fine of up to $5,000.
If you intend to remove your company auditor, or if your company auditor has resigned, it is important to be familiar with the relevant requirements to ensure compliance. You may therefore wish to get in touch with a professional corporate secretarial firm to assist with this procedure.
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