REGARDING SUBMISSION OF AUDIT REPORT

[ranganath shenoy]

A private limited company is faction ridden in that there are two group of directors,one group having 5 directors in their fold and another 4 in their fold.The previous auditor was removed by the first group by approaching the Regional Director of CLA. In the ongoing legal batles ,the second group brought a stay on holding of meetings ,whereby the CLB has directed the first group to only run the company and not convene any meetings until further orders.Now the second group is writing to the auditors appointed consequent upon removal of previous auditors,to submit draft audit report and accounts to them.Is auditor permitted under law to send draft audit reports and accounts which are not discussed in a formal board meeting

[MOHAN S]

The Auditors report is addressed to the share holders (members) of the company. As such, the Board has to adopt the Audit Report at its meeting and then circulate the same to members along with the Audited Financial Statements. 

You are right in your obseravtion about the discussion of auditors report at Board Meeting. Any group of Directors cannot give directions to teh Satutory Auditors. The Auditor shall ignore the letters written by one gorupu of directors. Alternately they can reply quoting the provisons of Companies Act they they are not bound to reply to a group of shareholders or directors.

AI Summary

Audit report adoption: auditors should circulate reports only after board adoption and need not comply with factional director requests. The auditor's report is addressed to the members and must be adopted by the Board at a formal board meeting before circulation with the audited financial statements; auditors should not accept directions from a faction of directors and may decline or ignore factional requests for draft reports, citing Companies Act provisions that they are not bound to respond to a divided group of directors or shareholders.