Explore the rotation of auditors’ team under the Companies Act, 2013. Learn about the provision, its implications, and considerations for companies.
Introduction
India’s corporate law has undergone through changes various times since the independence be it introduction of new companies act 2013, constitution of various expert company law committees or introduction of various new provisions of independent director, committees, evaluation etc., however without exaggerating more facts we will directly focus on the main act itself.
Analysis And Overview
While We All Have Heard About Rotation Of Term Of Company’s Auditor Can Company Rotate Term Of Staff, Interns, Accountant, Articles And Other Staff Members Of An Auditor?
While Companies Act Explicitly Mentions About Mandatory Rotation Of Auditor Under Section 139(1) Companies Act,2013 For Certain Class Of Companies But Doesn’t Specifically Mention About The Rotation Of Auditor’s Team So By A Simple Reading One Cannot Be Sure Of Such Provision Being There In Companies Act.
But There’s Catch Here In In The Section 139(3) Of Companies Act,2013 Where The Language Of Bare Act Says:
“Subject To The Provisions Of This Act, Members Of A Company May Resolve To Provide That –
(A) In The Audit Firm Appointed By It, The Auditing Partner And His Team Shall Be Rotated At Such Intervals As May Be Resolved By Members; Or
(B) The Audit Shall Be Conducted By More Than One Auditor”
In The Above Section I Would More Specifically Like To Put Focus On The Clause (A) Where The Itself Provides That Auditing Partner And His Team Can Be Rotated After Permission Of Member And Because No Special Requirement Has Been Mentioned It Can Be Said That Members Of Company After Passing An Ordinary Resolution Rotate The Partner And His Team.
However Following Points Should Be Considered While Studying The Above Provision:-
- The Above Provision Can Be Used To Rotate Auditor “And” His Team Both Simultaneously This Means When You Want To Rotate The Team You Necessarily Have To Rotate The Auditor As Well.
- Passing An Ordinary Resolution
- The Above Provision Applies Only In When An Audit Firm Is Appointed As There Is Clear Mention Of Audit Firm In The Clause(A) Itself
- The Provision Is Of General Nature And Does Not Apply Specifically To Company Or A Class Of Companies
- The Term Of Rotation Can Be Decided By Member Themselves Subject To Other Provisions Of The Act
Please Note That In The Entire Analyses Above We Are Not Concerned With Clause (b) of sub-section 3.
Thus, This Was All About A Deep Analysis Of A Simple Sub-Section Under Which When We Dig A Deep Inside Come Out Many Other Diverse And New Aspects Of Corporate Law.
Note: The Above Analysis Of Sub Section Is Based On My Own Understanding Which My Or May Not Be Correct, However Due Care Has Been Taken In Interpreting The Above Provision But In No Event I (Author) Shall Be Liable For Any Loss Incurred By Any Person.
Comments Of Learned And Respected Members Of Profession Are Also Invited And Be Grateful For That.
Thank You All For Taking Out Your Time And Hope This Helped You In Further Enrichment Of Your Intellectuality.
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