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

Director Dispute: Auditors Must Address Reports to Shareholders, Not Individual Director Groups, per Companies Act. A private limited company is experiencing internal conflict between two director groups, one with five directors and the other with four. The first group removed the previous auditor with approval from the Regional Director, while the second group obtained a stay on holding meetings. The second group is now requesting the new auditors to submit draft audit reports directly to them. The response clarifies that auditors' reports are addressed to shareholders and must be adopted by the Board at a formal meeting before circulation. Auditors should disregard requests from individual director groups and adhere to the Companies Act provisions.