Under the Companies Act 2006 the auditor of a private company is appointed for each financial year, usually by the members, and is normally deemed reappointed if nobody acts. Members can remove an auditor at any time, but only by ordinary resolution at a meeting with special notice. An auditor can resign by notice, and an outgoing auditor must usually send the company a statement of reasons under section 519, which may then reach members, Companies House and the audit regulator.

Who appoints the auditor of a private company?

Section 485 requires a private company to appoint an auditor for each financial year unless the directors reasonably resolve that audited accounts are unlikely to be required, for example because the company qualifies for audit exemption. After the first year, the appointment must be made in the “period for appointing auditors”, the 28 days beginning with the end of the time allowed for sending out the previous year’s accounts or, if earlier, the day they were sent out.

The directors may appoint the first auditor, an auditor after a period of audit exemption, or an auditor to fill a casual vacancy. Otherwise the members appoint by ordinary resolution. If the company fails to appoint, section 486 lets the Secretary of State appoint, and the company must notify the Secretary of State within one week of the end of the appointment period. Under section 492, an auditor appointed by the members has remuneration fixed by the members by ordinary resolution or in a manner they decide; one appointed by the directors has it fixed by the directors.

Only an eligible person can be appointed. Section 1212 requires the individual or firm to be a member of a recognised supervisory body and eligible under its rules, and section 1214 bars officers and employees of the company. The ethical rules that follow appointment are covered in our page on auditor independence and the FRC Ethical Standard.

What is different for a public company?

Section 489 applies the same structure to public companies, but the appointment must be made before the end of the accounts meeting at which the previous year’s accounts are laid. The directors’ powers to appoint the first auditor, after a period of exemption or to fill a casual vacancy run to the next accounts meeting.

How does deemed reappointment work?

Section 487 says a private company’s auditor holds office under the terms of appointment, but ceases to hold office at the end of the next period for appointing auditors unless reappointed. If no auditor is appointed by then, the existing auditor is deemed reappointed, unless:

  • the auditor was appointed by the directors;
  • the articles require actual reappointment;
  • members have prevented deemed reappointment under section 488, or resolved that the auditor should not be reappointed;
  • the directors have resolved that no auditor should be appointed for the year; or
  • the appointment would breach section 485C, which deals with maximum engagement periods for public interest entities.

The practical consequence is that a first year auditor appointed by the board is not automatically rolled over. The members need to appoint them for year two.

How do members remove an auditor during the term?

Section 510 allows members to remove an auditor at any time, but only by ordinary resolution at a meeting and in accordance with section 511. Section 288(2) prevents this from being done by written resolution. Section 511 requires special notice, which under section 312 means notice of the intention to move the resolution must be given to the company at least 28 days before the meeting. The company must immediately send a copy to the auditor, who may make written representations of reasonable length and ask for them to be sent to members. If they arrive too late or are not sent, the auditor can require them to be read out at the meeting.

Removal does not take away any right the auditor has to compensation or damages for termination (section 510(3)). Under section 513, a removed auditor keeps the section 502(2) rights to receive notice of, attend and be heard at the general meeting at which their term would have expired or at which the vacancy is to be filled. The meeting rules are explained in our page on general meeting notice.

How is an auditor replaced at the end of the term?

Where a private company proposes a written resolution appointing someone in place of an auditor whose term is ending, section 514 requires the company to send a copy to the proposed new auditor and to the outgoing auditor. The outgoing auditor has 14 days to make written representations, which the company must circulate with the resolution, and the period for circulating the resolution becomes 28 days instead of 21. If these requirements are not met, the resolution is ineffective. Where the change is made at a general meeting instead, section 515 requires special notice and gives the outgoing auditor a similar right to make representations.

How does an auditor resign?

Under section 516 an auditor resigns by sending a notice to the company. It takes effect on the date the company receives it or a later date stated in it. For a public interest company, the notice is not effective unless accompanied by the section 519 statement.

If the resignation is accompanied by a section 519 statement that sets out reasons or issues for members or creditors, section 518 lets the auditor requisition a general meeting to explain the resignation and ask for a written statement to be circulated. The directors must, within 21 days of receiving the requisition, convene a meeting for a date not more than 28 days after the notice convening it, and a director who fails to take reasonable steps commits an offence.

What statement must an outgoing auditor send?

Section 519 is the key protection for members and creditors. An auditor of a public interest company must always send a statement of reasons on ceasing to hold office. An auditor of any other company must send one unless either:

  • the auditor is leaving at the end of a period for appointing auditors (private company) or at the end of an accounts meeting (public company); or
  • all the reasons are exempt reasons and there is nothing connected with leaving that needs to be brought to the attention of members or creditors.

Section 519A(3) lists the exempt reasons: the auditor is leaving statutory audit work; the company is, or is to become, exempt from audit; the company is a subsidiary whose audit is moving to the group auditor (where that auditor audits all UK subsidiaries in the consolidation); or the company is being wound up.

The statement must give the auditor’s name and address, register number and the company’s name and number, plus details of any issues that need to be brought to members’ or creditors’ attention, or a statement that there are none. It must be sent with the resignation notice, at least 14 days before the end of the time for appointing a successor where the auditor is not seeking reappointment, or otherwise within 14 days of ceasing to hold office.

Where the statement sets out reasons or issues, the company must within 14 days send it to everyone entitled to receive the accounts or apply to court (section 520), and the auditor must send a copy to the registrar within a further seven days after the 21 day period for a court application (section 521). Under section 522 the auditor sends a copy to the appropriate audit authority, which for a company that is not a public interest company is the relevant supervisory body (section 525). Separately, section 523 requires the company to notify the audit authority within 28 days when an auditor leaves mid term, unless it reasonably believes the only reasons are exempt reasons. Failures are criminal offences.

How might a change of auditor play out?

Illustration only. A growing private company wants to change auditor after a disagreement over fees. It proposes a written resolution to appoint a new firm when the current auditor’s term ends. It sends copies to both firms, and the outgoing auditor makes no representations. Because the auditor is leaving at the end of a period for appointing auditors, no section 519 statement is required. The new auditor sends a professional enquiry, as described in our page on professional clearance when changing accountant, and under ISA (UK) 510 paragraph 6 must obtain evidence that the opening balances are free from material misstatement, which may include reviewing the predecessor’s working papers.

What mistakes do companies make?

  • Trying to remove an auditor mid term by written resolution, which section 288 prohibits.
  • Missing the 28 day special notice period.
  • Assuming a board appointed auditor continues automatically after the first year.
  • Ignoring the section 523 notice to the audit authority when an auditor leaves mid term.
  • Failing to send the outgoing auditor a copy of a replacement written resolution, which makes it ineffective.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.