Corporate and Business Law (Global) · Other company officers

Appointment, Removal and Resignation of Company Auditors

Updated 11 October 2026 · Fact-checked

Auditors are normally appointed by the members by ordinary resolution, though directors may fill a first or casual vacancy. Members can remove them by ordinary resolution with special notice. Auditors can resign by written notice, which must include a statement of circumstances or a statement that there are none. Rules vary by jurisdiction.

Understand Auditors: Appointment, Removal and Resignation

An auditor is an independent professional who checks whether a company's financial statements give a true and fair view. The auditor reports to the members (shareholders), not to the directors. That is why the law gives members, not directors, the main power to appoint and remove the auditor.

In the Global variant, ACCA tests the general model that is common to many company law systems. Local rules differ, so answer on the general principles and apply any facts given in the question. Do not quote section numbers.

Appointment. A company that must have an audit appoints its auditor, usually at the general meeting where the accounts are laid, by ordinary resolution. The first auditor, and any vacancy that arises between meetings, can usually be filled by the directors. The members can also fill the vacancy. If nobody appoints, a regulator or government minister can often step in. Many systems require auditors of public companies to be appointed every year. Private companies often keep the auditor in office automatically unless the members object, because they do not always hold annual meetings.

Removal. Members can remove the auditor at any time by ordinary resolution, whatever the contract says. Special notice is needed, normally at least 28 days before the meeting. The company must send a copy of the notice to the auditor. The auditor can then make written representations that the company must send to members, and can speak at the meeting. The company can lose the right to circulate them if the auditor abuses the right to defame. Directors cannot remove an auditor themselves. Removal does not stop the auditor claiming compensation for breach of contract.

Resignation. An auditor can resign by giving written notice to the company. The notice must contain a statement of circumstances connected with the resignation that the auditor thinks members or creditors should know about. If there are none, the notice must say so. The company must send the statement to members, and the auditor can require a general meeting to explain it. The auditor also usually has to send a copy to the regulator. This stops an auditor from walking away quietly from a problem.

The auditor's remuneration is set by whoever appoints the auditor. Members fix it by ordinary resolution, directors fix it where they made the appointment, and the resolution can delegate it to directors.

Key formulas to remember

Appointment by members: Auditor appointed by ordinary resolution of members (more than 50% of votes cast); This is the normal route at the general meeting where accounts are laid.
Appointment by directors: Directors fill the first appointment or a casual vacancy; Members can still fill the vacancy. Directors' power does not apply if the members must appoint.
Removal: Ordinary resolution + special notice (28 days) + copy to auditor; Removal is at any time. The auditor can make written representations and speak at the meeting.
Resignation: Written notice + statement of circumstances (or statement that there are none); The company sends the statement to members. The auditor can require a meeting to explain it.
Remuneration: Fixed by whoever appoints the auditor; Members by ordinary resolution, or directors if they made the appointment.

How to solve Auditors: Appointment, Removal and Resignation questions

Use this order for any question on auditor appointment, removal or resignation. It keeps the answer tied to who holds the power.

1Identify what the question asks: appointment, remuneration, removal or resignation.
2Note the type of company, public or private, and whether it is a first appointment, a casual vacancy or a routine reappointment.
3State who holds the power: members by ordinary resolution, or directors for the first or casual vacancy.
4For removal, state the procedure: ordinary resolution, special notice, copy to the auditor, representations and right to speak.
5For resignation, state the written notice, the statement of circumstances or a statement of none, and what the company must do with it.
6Apply the rule to the facts given and reach a clear conclusion.
7Add the protection point if relevant: removal does not remove a claim for breach of contract.

Quickest way: Who, how, what must be said

When to use it: Use this on Section A questions and Section B multi-task questions when time is short.

Ask who: members or directors?
Ask how: ordinary resolution, and special notice if removal.
Ask what must be sent: copy to the auditor, representations, or statement of circumstances.
Eliminate any option that lets directors remove the auditor, or that requires a special resolution.
Pick the option that matches the facts and the exact rule.

Common mistakes in Auditors: Appointment, Removal and Resignation

Saying directors can remove the auditor.
Students assume the board controls everyone it hires.
Fix: Removal is a members' power by ordinary resolution. Directors have no power to remove.
Saying removal needs a special resolution.
Removal feels serious, so students pick the higher majority.
Fix: It is an ordinary resolution, but with special notice.
Forgetting the auditor's right to make representations.
Students focus on the company's steps only.
Fix: Always add: copy of notice to the auditor, written representations circulated, and right to speak at the meeting.
Saying a resigning auditor only needs to give notice.
Students treat resignation like a normal job resignation.
Fix: The notice must include a statement of circumstances, or a statement that there are none.
Thinking the directors always appoint the auditor.
Directors run the business, so students assume they hire advisers.
Fix: Directors only fill the first appointment or a casual vacancy. Otherwise members appoint.
Believing removal ends all claims.
Students mix up the company law right to remove with the contract.
Fix: The right to remove is a company law right. The auditor may still claim damages for breach of contract.

Worked examples

Example 1

The directors of Zeta Co want to replace their auditor because of repeated disagreements over provisions. Advise them on how the auditor can be removed and what rights the auditor has.

Show the solution

The directors cannot remove the auditor. The power belongs to the members.
The members remove the auditor by ordinary resolution at a general meeting.
Special notice of the resolution is needed, normally 28 days before the meeting.
The company must send a copy of the notice to the auditor.
The auditor can make written representations that the company must send to members, and can speak at the meeting.
The auditor may still claim compensation if the removal breaches the contract.

Answer: The directors cannot remove the auditor. They must put an ordinary resolution with special notice to the members. The auditor receives a copy, can make representations and can speak at the meeting, and may claim damages for breach of contract.

Example 2

An auditor of Kiran Ltd resigns after concluding that the finance director has been withholding information. State what the resignation notice must contain and what happens next.

Show the solution

Resignation is by written notice to the company.
The notice must include a statement of circumstances connected with the resignation that the auditor thinks members or creditors should know about.
Here, the withheld information is such a circumstance, so it must be stated. If there were none, the notice would say so.
The company must send the statement to the members.
The auditor can require the directors to call a general meeting to explain the circumstances.
The auditor usually also sends a copy to the regulator.

Answer: The notice must be written and must contain a statement of circumstances, here the withholding of information. The company circulates it to members. The auditor may require a general meeting to explain, and usually informs the regulator.

Exam tips

Section A traps swap ordinary and special resolution. Remember: ordinary resolution, with special notice.
Always say who holds the power. Many wrong options give it to the directors.
For a resignation question, name the statement of circumstances. It is the usual mark.
Use the facts: a first appointment or casual vacancy points to the directors, a routine reappointment points to the members.
In multi-task questions, list the steps in order so each is a separate mark.

Practice questions from Other company officers

Auditors: Appointment, Removal and Resignation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Auditors: Appointment, Removal and Resignation: frequently asked questions

Who appoints the auditor of a company?

Normally the members, by ordinary resolution. Directors usually appoint the first auditor and fill a casual vacancy. Public companies commonly must appoint an auditor every year, while private companies often reappoint automatically.

How can an auditor be removed from office?

The members pass an ordinary resolution at a general meeting after special notice. The auditor gets a copy, can make written representations and can speak at the meeting. Directors cannot remove the auditor.

What is a statement of circumstances?

It is a statement the resigning auditor sends with the resignation notice. It sets out any circumstances the auditor thinks members or creditors should know about. If there are none, the auditor states that.

Can a removed auditor claim compensation?

Yes, possibly. The right of members to remove the auditor does not cancel the auditor's contract rights, so damages for breach of contract may still be claimed.