Rotation of Auditors Section 139(2) of Companies Act 2013


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Meaning of appointment: Appointment includes reappointment.

Rotation of Auditors {Section 139(2)}

Applicability: Rotation of auditors will be applicable on the below mentioned class of companies:

  • Listed company
  • The following classes of companies excluding one person companies and small companies:

(a) all unlisted public companies having paid up share capital of Rs. 10 crore or more

(b) all private limited companies having paid up share capital of Rs. 50 crore or more

(c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of Rs. 50 crores or more

Non-Applicability: Rotation of auditors will not be applicable on the below mentioned class of companies:

  • One Person Companies (OPC)
  • Small Companies

‘‘Small company’’ means a company, other than a public company-

  • paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than Rs. 5 crore; or
  • turnover of which as per its last profit and loss account does not exceed Rs. 2 crore or such higher amount as may be prescribed which shall not be more than Rs. 20 crore:

Provided that nothing in this clause shall apply to—

    • a holding company or a subsidiary company;
    • a company registered under section 8; or
    • a company or body corporate governed by any special Act;

Terms of Rotation: The class of companies on which this section is applicable which is prescribed above shall not appoint or re-appoint: –

  • an individual as auditor for more than one term of five consecutive years (i.e. 5 years)
  • an audit firm as auditor for more than two terms of five consecutive years (i.e.10 years)

Point to be Noted for Term of Rotation:

► Also the individual auditor who has completed his term of 5 years shall not be eligible for re-appointment as auditor in the same company for 5 years from the completion of his term

► And that audit firm which has completed its term of 10 years, shall not be eligible for re-appointment as auditor in the same company for 5 years from the completion of such term

► That means there must be a gap of 5 years in both the cases either it is an individual auditor or an audit firm after completing the period of 5 years or 10 years as mentioned above.

► Also it must be noted that if on the date of appointment, there is any common partner/ partners who were in the audit firm whose tenure has expired in the other audit firm, then that audit firm will also be not eligible for appointment.

1. Appointment of Statutory Auditor in case of Companies other than Government Companies
2. Appointment of Statutory Auditor in case of Government Companies

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