Companies Act, 2013

Procedure for Rotation of Auditor

Aakanksha Singhal Aakanksha Singhal
Aakanksha Singhal

Published on: Sep 25, 2020

Khushboo Sharma
Khushboo Sharma

Updated on: Sep 30, 2023

(17 Rating)


Every Company incorporated in terms of the provisions of Companies Act, 2013 requires to get their financial records reviewed and verified by qualified professionals. Thus, after incorporation companies shall ensure appointment of a qualified auditor in terms of the provisions of Companies Act, 2013. Every company appoint its first auditor by Board within 30 days from Incorporation and if Board fails to do so then members of Company appoint first auditor at Extra-ordinary general meeting within 90 days till the conclusion of First Annual General Meeting. At first Annual General Meeting an auditor appointed who shall be an individual or a hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting.

Rotation of Auditor is appointing a new auditor when

  • an individual had been appointed as an auditor for more than one term of five consecutive years
  • an audit firm had been appointed as an auditor for more than two terms of five consecutive years.

For the purpose of the rotation of auditors means following class of companies but small companies and one person companies not included:

  1. Every Listed Company
  2. Unlisted Public Companies having share capital of Rupees 10 crore or more
  3. All private limited companies having paid up share capital of rupees 50 crore or more
  4. Companies having paid up share capital of below threshold limit mentioned above, but having public borrowings from financial institutions, banks or public deposits of rupees 50 crores or more

Mandatory Requirements

For the purpose of the rotation of auditors

  • in case of an auditor (whether an individual or audit firm), the period for which the individual or the firm has held office as auditor prior to the commencement of the Companies Act, 2013 shall be taken into account for calculating the period of five consecutive years or ten consecutive years.
  • 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.
    The term “same network” includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control.
  • a break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation.
  • 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.


  1. Obtain written consent and Certificate from the Proposed Auditor [Section 139(1) & Rule 4(1) of the Companies (Audit and Auditors) Rules, 2014]
    Company shall receive before such appointment is made, the written consent of the auditor to such appointment and a certificate from him or it that the appointment, if made, shall be in accordance with the conditions. The Auditor shall submit a certificate
    • that the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made thereunder
    • that the proposed appointment is as per the term provided under the Act
    • that the proposed appointment is within the limits laid down by or under the authority of the Act
    • that the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
  2. Obtain recommendations for appointment from the Audit Committee [Section 139 (11), 177]
    Where a Company is required to constitute an Audit Committee under section 177, shall receive a recommendation from the committee for the appointment and remuneration of the Auditor. In other cases, the Board shall itself consider the matter of rotation of auditors and make its recommendation for appointment of the next auditor by the members in annual general meeting. Please refer to the Procedure for Conducting Audit Committee Meeting for the detailed procedure
  3. Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-1)]
  4. Convene Annual General Meeting [As per Section 96 and Secretarial Standard-2 (SS-2)]
  5. Filing Notice of Appointment with ROC
    The Company shall inform the Auditor so appointed about the appointment and file a notice of such appointment with the Registrar in E-Form ADT-1 within 15 days of the general meeting along with the following attachments:
    • Certified true copy of the Ordinary Resolution passed in the AGM
    • Intimation/Offer Letter given by the Company to the Auditor
    • Consent Letter given by the Auditor to the Company
    • Certificate given by the Auditor to the Company.

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