Notification No. G.S.R. 359(E) | Dated: 4th June 2025 | Effective from: 14th July 2025 Introduction
In a decisive move to strengthen audit governance and transparency, the Ministry of Corporate Affairs (MCA) has notified the Companies (Audit and Auditors) Amendment Rules, 2025, substituting key statutory forms ADT-1 to ADT-4. These changes, effective 14th July 2025, aim to reinforce auditor accountability, streamline regulatory traceability, and prevent procedural misuse.
This article examines the legal basis, interpretive nuances, and operational impact of the revised forms, offering practical guidance to corporates, auditors, and compliance professionals.
Statutory Basis & Rulemaking Authority
The amended forms derive their authority from the following provisions under the Companies Act, 2013:
| Form | Relevant Section | Related Rule |
|---|---|---|
| ADT-1 | Section 139 – Appointment of Auditors | Rule 4 of Audit Rules |
| ADT-2 | Section 140(1) – Removal of Auditor | Rule 7 |
| ADT-3 | Section 140(2) – Auditor’s Resignation | Rule 8 |
| ADT-4 | Section 143(12) – Reporting of Fraud | Rule 13 |
Key Amendments and Their Legal Interpretation
ADT-1 – Auditor Appointment: Past Conduct Now Mandatory
Key Change:
Disclosure of:
-
Nature of appointment (first, reappointment, casual vacancy), and
-
Prior audit relationships of the auditor/partner/firm with the company or its group entities.
Interpretation:
This change ensures stricter enforcement of Section 139(2) and Rule 6(3), which prohibit the reappointment of auditors in certain circumstances. By requiring disclosure of prior associations, the MCA aims to curb rotational circumvention through proxy appointments or internal partner shuffling.
Implication:
Company Secretaries must vet historical audit connections at group level, not just the individual entity.
ADT-2 – Removal of Auditor: Proof of Notice Now Compulsory
Key Change:
ADT-2 must now include documentary proof that the auditor was served notice regarding the proposed removal.
Interpretation:
This procedural safeguard enforces audi alteram partem — the right to be heard — under Section 140(1). Removal of auditors without prior notice or proper justification may be summarily rejected by the Central Government.
Implication:
Proof of service (email delivery receipt, postal acknowledgment) becomes a precondition for valid ADT-2 filing.
ADT-3 – Auditor’s Resignation: SRN Linkage Introduced
Key Change:
Auditor must quote the SRN (Service Request Number) of the original ADT-1 form that recorded the appointment.
Interpretation:
This change links resignation directly to the prior appointment, enabling MCA to identify and investigate patterns of early resignations, auditor withdrawal, or client pressure. It creates a digital trail for regulatory scrutiny under Section 140(2).
Implication:
Auditors must maintain records of all SRNs for their filings. CS teams should assist in retrieval where necessary.
ADT-4 – Reporting of Fraud: Specificity Made Mandatory
Key Change:
ADT-4 must now disclose:
-
Official email ID of the company,
-
Exact location of the fraud incident, and
-
Name(s) of officers involved in the fraud.
Interpretation:
This amplifies the responsibility of auditors under Section 143(12) to report frauds with precise details. It supports targeted enforcement under Section 447 (Punishment for Fraud) and strengthens SFIO and ROC investigations.
Implication:
Auditors and internal teams must collaborate to identify office addresses and responsible officers. Vague or generalised reporting will not suffice.
Summary Table: Old vs. New Compliance Requirements
| Form | Earlier Compliance | Revised Requirement (from 14.07.2025) |
|---|---|---|
| ADT-1 | Appointment details only | Must include prior audit conduct & nature of appointment |
| ADT-2 | Reasons for removal | Must also attach proof of notice to auditor |
| ADT-3 | Resignation info | Must mention ADT-1 SRN for traceability |
| ADT-4 | Fraud description | Must include company email, fraud location & officer names |
Compliance Checklist for Corporates and Auditors
| Stakeholder | Key Action Point |
|---|---|
| Company Secretaries | Maintain SRN logs, vet prior audit relationships |
| Boards & Audit Committees | Ensure proof-based auditor removals, pass correct resolutions |
| Auditors | Preserve ADT-1 SRNs, provide precise fraud info, file timely ADT-3 and ADT-4 |
| Internal Audit Teams | Identify location/officer details in fraud instances |
Strategic Impact
This amendment strengthens India’s audit regime in the following ways:
✅ Audit Accountability: Eliminates ambiguity around appointment and resignation histories.
✅ Procedural Fairness: Auditor’s right to notice now codified in filing prerequisites.
✅ Enforcement Readiness: Specifics in fraud reporting support quicker enforcement and prosecutions.
✅ Governance Trail: Enables MCA to track auditor conduct across group entities.
Conclusion
The overhaul of the ADT forms marks a substantive policy step by MCA to enhance audit transparency, procedural discipline, and governance compliance. It reinforces India's commitment to investor protection, audit integrity, and fraud detection under the Companies Act, 2013.
Stakeholders must align their processes, checklists, and systems before 14 July 2025 to avoid filing errors, rejection of forms, or regulatory setbacks.
- By Sandeep Ahuja
