Section 550: Auditor Rotation

Section 550: Auditor Rotation · Complied AI

(b)

above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more. 6 In case of Specified IFSC Private Company- All provisos to sub section (2) of section 139 shall not apply. - Notification Dated 4th January 2017.

(ii)

an audit firm which has completed its term under clause (b), shall not be eligible for re-appointment as auditor in the same company for five years from the completion of such term: 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:

Proviso

Provided also that every company, existing on or before the

commencement of this Act which is required to comply with the provisions of this sub-section, shall comply with requirements of this sub-section within a period which shall not be later than the date of the first annual general meeting of the company held, within the period specified under sub- section (1) of section 96, after three years from the date of commencement of this Act.

Proviso

Provided also that, nothing contained in this sub-section shall

prejudice the right of the company to remove an auditor or the right of the auditor to resign from such office of the company.” For detailed provisions, please refer to the complete Section 139 of the Companies Act 2013.

Auditor rotation requirements for stock brokers

accordance with the SEBI circular SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/90 issued dated 17th June 2025, the prescribed rotation requirements are as under: 15.7.3. No stock broker shall appoint or re-appoint— 15.7.3.1 an individual as statutory auditor for more than one term of five consecutive years; 15.7.3.2 an audit firm as statutory auditor for more than two terms of five consecutive years:

Proviso

Provided that—

15.7.4. An individual statutory auditor who has completed his term under para 15.7.3.1 above shall not be eligible for re-appointment as statutory auditor in the same stock broker for five years from the completion of his term. 15.7.5 An statutory audit firm which has completed its term under under para 15.7.3.2 above, shall not be eligible for re-appointment as statutory auditor in the same stock broker for five years from the completion of such term: .

Proviso

Provided further that as on the date of appointment

no statutory audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a stock broker immediately preceding the financial year, shall be appointed as statutory auditor of the same stock broker for a period of five years:

Auditor rotation requirements for Mutual funds

In accordance with Para 6.5.2 of the SEBI circular

SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/90 issued dated 27th June, 2024, the prescribed rotation requirements are as under: “With respect to appointment of auditors in terms of Regulation 55 (1) of SEBI (MFs) Regulation, 1996, it has been decided that: 6.5.2.1 No mutual fund shall appoint an auditor for more than 2 terms of maximum five consecutive years. Such auditor may be re-appointed after cooling-off period of 5 years. 6.5.2.2. Further, during the cooling-off period of five years, the incoming auditor may not include: a. Any firm that has common partner(s) with the outgoing audit firm b. Any associate firm(s) of the outgoing audit firm which are under the same network of audit firms wherein the term “same network” includes the firms operating or functioning, hitherto or in the future, under the same brand name, trade name or common control 6.5.2.3 Existing auditors may be appointed for a maximum of 10 years (including all preceding years for which an auditor has been appointed in terms of Regulation 55

(1)

of SEBI (Mutual Funds) Regulation, 1996). In this respect, the following may be noted: a.

Auditors who have conducted audit of the Mutual

Fund for less than 9 years (as on November 30, 2017) may continue for the residual period of service. b.

Auditors who have conducted audit of the Mutual

Fund for 9 years or more (as on November 30, 2017) may continue till the end of F.Y. 2018-19 c.

Such auditors shall subsequently be eligible for

re-appointment after a cooling-off period of 5 years, in terms of Paragraph 6.5.2.1 and Paragraph 6.5.2.2.

Statutory Central Auditors (SCA) /Statutory Auditors

(sas)

rotation requirements for Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) In accordance with the RBI circular DoS.CO.ARG/SEC.01/08.91.001/2021-22 issued dated 27th April 2021, “In order to protect the independence of the auditors/audit firms, Entities will have to appoint the SCAs/SAs for a continuous period of three years, subject to the firms satisfying the eligibility norms each year. Further, Commercial Banks (excluding RRBs) and UCBs can remove the audit firms during the above period only with the prior approval of the concerned office of RBI (Department of Supervision), as applicable for prior approval for appointment, as mentioned at Para 3.2 of this circular. NBFCs removing the SCAs/SAs before completion of three years tenure shall inform concerned SSM/RO at RBI about it, along with reasons/justification for the same, within a month of such a decision being taken. An audit firm would not be eligible for reappointment in the same Entity for six years (two tenures) after completion of full or part of one term of the audit tenure.

However, audit firms can continue to undertake statutory audit

of other Entities”.

Auditor rotation requirements for appointed under

Employees’ provident funds scheme, 1952

As per paragraph 24(c) of the Employees’ provident funds

scheme, 1952, “the same auditors should not be appointed for two consecutive years and not more than two years in a block of six years”.