How does an Ontario corporation appoint or replace its auditor?

Under the Ontario Business Corporations Act, the auditor of a corporation is appointed by the shareholders at each annual meeting to hold office until the close of the next annual meeting. This is why auditor appointment is a standing item on the agenda of every annual shareholders' meeting or annual written resolution.

If shareholders of a private corporation have waived the audit requirement for the year (as they are entitled to do for non-distributing corporations), no auditor needs to be appointed. If the audit is not waived, the shareholder resolution should name the auditing firm or sole practitioner being appointed.

When a corporation wants to change auditors mid-year or remove an auditor before their term expires, there is a specific process. The outgoing auditor must be given an opportunity to make representations to the shareholders, and those representations must be made available to shareholders. This process is designed to prevent corporations from quietly removing auditors who raise concerns. If you are switching accounting firms, speaking with a lawyer about the proper process for resignation and replacement will ensure no regulatory or governance issues arise from the transition.