Resolving Audit Reporting Issues After an Auditor Refuses to Provide a Report Needed for ROC Filing

When it comes to tax compliance, companies must fulfill their obligations to file income tax returns (ITRs). This often involves working closely with auditors who assist in the preparation and submission of these returns. However, complications can arise when one auditor, who has submitted an ITR, fails to provide the required audit report necessary for the official return of company occupancy (ROC) filing. This article aims to clarify the situation and offer guidance on how a second auditor can proceed in such circumstances.

Understanding Auditor Obligations and Procedures

For a company to fulfill its tax obligations, it is essential to maintain accurate financial records. Auditors play a vital role in ensuring the accuracy and completeness of these records. If an auditor submits an ITR but refuses to provide the requisite audit report, the company faces a significant challenge. This situation is especially problematic when the ROC filing is dependent on the audit report.

What You Need to Know About Appointing a Second Auditor

First, it's crucial to understand that a second auditor can indeed prepare an audit report for an ITR submitted by a first auditor, under certain conditions. To do so, the following steps must be considered:

1. Term of Expiry for the First Auditor

The first step involves reviewing the term for which the existing auditor is currently appointed. If an auditor has submitted an ITR without providing an audit report, it is likely due to a refusal or inability to do so. You can request the first auditor to provide the audit report, but if they refuse, you can take the following actions:

2. Approving Removal of the Existing Auditor

To remove the current auditor before the expiration of their term, several steps are required:

Obtain approval from the central government Pass a resolution in the board of directors Conduct a special resolution at the general meeting

Once these steps are completed, you can file Form ADT-3 to remove the existing auditor from their position. Then, you need to appoint a second auditor by submitting Form ADT-1. This process ensures that the second auditor is officially recognized and can proceed with the audit report.

Two Scenarios for Audit Report Prepared by the Second Auditor

There are two primary scenarios in which a second auditor can prepare the audit report for the ITR submitted by the first auditor:

Scenario 1: Company Requires Tax Audit

If the company is required to undergo a tax audit, the second auditor can indeed assist in preparing the necessary audit report. In this situation, the second auditor can file the 3rd condensed income tax audit report (3CA) with the ITR. Simultaneously, they can prepare the company audit report from a different angle, ensuring a compliant and thorough financial assessment.

Scenario 2: No Tax Audit Required

If the company does not require a tax audit, the second auditor can still prepare the audit report without any issues. In this case, there is no need to file a 3CA, and the second auditor can provide the audit report after obtaining necessary consent from the first auditor.

Professional Ethics and Non-Obstructive Measures

Notably, the situation may be further complicated by professional ethics and legal considerations. According to the Institute of Chartered Accountants of India (ICAI), the second auditor must obtain a no-objection certificate (NOC) from the first auditor. This is a requirement based on professional ethics. Additionally, if the first auditor has not been paid their due fees, the second auditor may face legal trouble if they proceed without resolving the payment issue.

Conclusion

In summary, a second auditor can prepare an audit report for an ITR submitted by a first auditor, under certain conditions. However, the process involves addressing the term expiry for the first auditor and ensuring proper removal and appointment procedures. Professional ethics also play a crucial role, emphasizing the need for obtaining a NOC from the first auditor.

It is essential to navigate this situation carefully to avoid complications and ensure compliance with tax and financial regulations. By following the steps outlined above, companies can ensure that their financial and tax obligations are met without undue hindrance.