Rotation of auditor
CA Shraddha Vora
(Querist) 24 August 2016
This query is : Resolved
Suppose there is Private Limited Company ‘XYZ Pvt. Ltd.’ to which ‘Rotation of Auditors’ is applicable.
Facts are as follows:
(a) ‘M/s. RS and Associates’ was serving as Auditors of the Company till the FY 2013-14.
(b) Then the Company appointed ‘M/s. PQ and Associates’ as auditors on 30/09/2014 for FY 2014-15
(c) Then ‘M/s. PQ and Associates’ resigned as auditors on 29/09/2014 and ‘M/s. RS and Associates’ were appointed as new Auditors.
(d) Now, ‘M/s. RS and Associates’ wants to resign resulting into creation of Casual Vacancy.
(e) The Company proposes to appoint ‘M/s. PQ and Associates’ as Auditors to fill the Casual Vacancy (which has already served the Company for a period of 1 year)
The issue is, can M/s. PQ and Associates be appointed to fill the Casual Vacancy u/s 139(8) and is the Clause (a) of Explanation II to the Rule 6(3) Companies (Audit and Auditors) Rules, 2014 applicable to M/s. PQ and Associates.
Ms.Usha Kapoor
(Expert) 11 September 2016
Dear Client,
Go Ahead AND appoint PQ Associates as auditors as they haven't been appointed for consecutive years of 5 year term. To fill the casual vacancy OF auditors BY ROTATION you can ENTRUST THE WORK TO COMPANIES Board OF DIRECTORS Or Audit Committee WHOSE DECISION WITH REGARD TO Appointment of AUDITORS IS FINAL.You go through the following information also regarding rotation of Auditors.You also need to hold AGM to appoint Auditors by rotation even if they were auditors in their earlier term.
The Company Audit
6.13
or brand is used by such individual, if any.
2. Consecutive years shall mean all the preceding financial years for which the
individual auditor has been the auditor until there has been a break by five years or
more.
*Illustration explaining rota
tion in case of audit firm
Number of consecutive
years for
which an audit firm has been
functioning as auditor in the
same company [in the first AGM
held after the commencement of
provisions of section
139(2)]
Maximum number of
consecutive years for
which the firm may be
appointed in the same
company (including
transitional period)
Aggregate period
which
the firm would
complete in the same
company in view of
column I and II
I
II
III
10 Years (or more than 10
years)
3 years
13 years or more
9 years
3 years
12 years
8 years
3 years
11 years
7 years
3 years
10 years
6 year
4 years
10 years
5 years
5 years
10 years
4 years
6 years
10 years
3 year
7 years
10 years
2 years
8 years
10 years
1 years
9 years
10 years
Note:
1. Audit Firm shall include
other firms whose name or trade mark or brand is used by
the firm or any of its partners.
2. Consecutive years shall mean all the preceding financial years for which the firm
has been the auditor until there has been
a break by five years or more.
(4) Where a company has appointed two or mo
re individuals or firms or a combination
thereof as joint auditors, the company may foll
ow the rotation of auditors in such a manner
that both or all of the joint auditors, as the ca
se may be, do not complete their term in the
same year.
6. 4 Provisions rela
ting to Audit Committee
6.4.1 Applicability of section 177 i.e. Constitution of Audit Committee:
Where a company
is required to cons
titute an Audit Committee under section 177, all appointments, including the
filling of a casual vacancy of an auditor under
this section shall be made after taking into
account the recommendations of such committee.
