You may also like the following Posts:
Excel for
Auditors rotation to be maximum at AGM date after three years:
Chapter X of The Companies Act, 2013 deals with Audit and Auditors. Section 139 regarding “Appointment of Auditors” has come into force w.e.f. 1 st April, 2014. (See Notification Click Here >> ) Sub section (2) of Section 139 provides as under:
No listed company or a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appoint-
Provided that— Provided further that as on the date of appointment no audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a company immediately preceding the financial year, shall be appointed as auditor of the same company for a period of five years: The third proviso to section 139(2) provides that every company,existing on or before the commencement of this Act which is required to comply with provisions of this sub-section, shall comply with the requirements of this sub-section within three years from the date of commencement of this Act: As per the third proviso as above, every company, existing on orbefore 1 st April, 2014 has been give a transitional/grace period of three years to comply sub section (2) of Section 139.
Class of Companies to which section 139(2) applies
For the purposes of sub-section (2) of section 139, apart from listed companies, the class of companies shall mean the following classes of companies excluding one person companies and small companies:-
Rule 3 regarding rotation of auditors is as under :
(i) in case of an auditor (whether an individual or audit firm), the period for which the individual or the firm has held office as audit or prior to the commencement of the Act shall be taken into account for calculating the period of five consecutive years or ten consecutive years, as the case may be;
(ii) the incoming auditor or audit firm shall not be eligible if such auditor or audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms.
Explanation. I
- For the purposes ofthese rules the term “same network” includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name orcommon control.
Explanation. II
- For the purpose of rotation of auditors,-
(a) a break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation;
(b) if a partner, who is in charge of an audit firm and also certifies the financial statements of the company, retires from the said firm and joins another firm of chartered accountants, such other firm shall also be ineligible to be appointed for a period of five years.
In the light of The Companies (Audit and Auditors) Rules, 2014 the deadlines for rotation of auditors and total tenure period allowed after considering the transitional/grace period of three years shall be as under depending on the existing tenure are as under:
Illustration explaining rotation in case of individual auditor
Number of consecutive years for which an individual auditor has been functioning as auditor in the same company [in the first AGM held after 1
st
April, 2014]
Maximum number of consecutive years after 1
st
April, 2014 for which he may be appointed in the same company after transitional/grace period
Aggregate period which the auditor would complete in the same company in view of column I and II
I
II
III
5 years or more
3 years
8 years or more
4 years
3 years
7 years
3 years
3 years
6 years
2 years
3 years
5 years
1 year
4 years
5 years
Note: 1. Individual auditor shall include other individuals or firms whose name or trade mark or brand is used by such individual, if any
Examples:
An auditor appointed as auditor in an AGM dated 30/09/2009 or earlier can hold auditor’s post till AGM to be held in next three years starting from 1
stApril, 2014 (on or before 29-09-2017). Thus total tenure can be up to Eight Years.
An auditor appointed as auditor in an AGM dated 30/09/2010 or earlier can hold auditor’s post till AGM to be held in next three years starting from 1
st
April, 2014 (on or before 29-09-2017). Thus total tenure can be up to Seven Years.
An auditor appointed as auditor in an AGM dated 30/09/2011 or earlier can hold auditor’s post till AGM to be held in next three years starting from 1
st
April, 2014 (on or before 29-09-2017) Thus total tenure can be up to Six Years.
An auditor appointed as auditor in AGM dated 30/09/2012 or earliercan hold auditor’s post till AGM to be held in three years from 1
st
April, 2014 (on or before 29-09-2017) Total Five Years.
An auditor appointed as auditor in AGM dated 30/09/2013 or earliercan hold auditor’s post till AGM to be held in three years from 1
st
April, 2014 (on or before 29-09-2017) Total Four Year.
Illustration explaining rotation 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 1
st
April, 2014]
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
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 years
4 years
10 years
5 years
5 years
10 years
4 years
6 years
10 years
3 years
7 years
10 years
2 years
8 years
10 years
1 year
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.
Download The Companies (Audit and Auditors) Rules, 2014 Click Here >>
|