By P. N. Shah, H. N. Motiwalla,Chartered Accountants
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In February, 2014, the Journal of BCAS (P.631) the issue relating of Rotation of Auditors was discussed. It may be noted that section 139 of the Companies Act, 2013, has now come into force w.e.f. 01-04-2014. This section provides for rotation of auditors. In the case of a CA firm, the maximum period is fixed as 10 years and in the case of an Individual the period is 5 years with rest period of 5 years for audit of a company to which the section applies.
The Ministry of Corporate Affairs has now notified Companies (Audit and Auditors) Rules, 2014. These Rules have come into force on 01-0402014. Rule 5 provides that the provision for Rotation of Auditors u/s. 139 will apply to only(a) Listed Companies, (b) Unlisted Companies having paid up Share capital of Rs. 10 crore, (c) Private Companies having paid share capital of Rs. 20 crore and (d) Any Public or Private Company, not covered by (a) (b) or (c) above, which has public borrowings from financial institutions, banks or public deposits of Rs. 50 crore or more.
Rule 6 states that the period for which the auditor has held office as an auditor prior to the commencement of the Act (i.e., 01-04-2014) should be taken into account for calculating the period of 5 consecutive years (For the individuals) or 10 consecutive years (For the firm). This will mean that if a CA Firm is an auditor of a company to which the section applies for 10 years or more prior to 01-04-2014, that firm can continue as auditor of that company for grace period of 3 years only. This Rule gives a chart explaining the years for which the auditor can continue as an auditor of the specified company after 01-04-2014.
