Provisions in regard to the removal of an auditor are as follows:
(1) When the first auditors of a limited company are appointed by the Directors prior to the First Annual General Meeting, such auditors may be removed by the members in General Meeting.
The General Meeting may, in their place, appoint any other person whose nomination notice has been given by any member not less than fourteen days before the date of the meeting.
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(2) In any other case, an auditor may be removed from office before the expiry of his term, only by the company in General Meeting after obtaining the previous approval of the Central Government.
(3) Section 225 of the Companies Act, 1956, makes special provisions in this respect, which, it appears, have been provided to ensure justice and fair play. The procedure so laid down is as follows:
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(a) Special Notice of intention to move such resolution to remove the existing auditor must be given to the company by a shareholder, not less than fourteen days before the Annual General Meeting.
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(b) On receipt of such a notice, the company must forthwith send a copy thereof to the retiring auditor.
(c) The retiring auditor shall have the right to send a representation (not exceeding a reasonable length) to the company which in its turn shall send it to shareholders, provided a representation was received in time. The auditor may ask the company for such representation to be sent to the members of the company.
(d) If a copy of the representation is not sent to the members, either because it was received too late to be thus sent, or because of default by the company, the auditor may insist that the representation shall be read out in the meeting.
(e) If, on the application, cither of the company or of any other person who claims to be aggrieved, the Court is satisfied that the rights to attend the General Meeting where his removal is to be discussed. He has also a right to speak at such a meeting.
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(g) As a matter of professional conduct, the auditor appointed in place of another should communicate with the retiring auditor in writing before accepting appointment. If he does not, he may be held liable to disciplinary action as per regulations of the Institute of Chartered Accountants in India.