Can a company appoint auditor for a term less than 5 years as per its policy of rotation of auditor keeping in mind provisions of Companies Act 2013? Is it mandatory to appoint auditors for a term of 5 years only?
CA Ankit Adhyaru (Partner - Yusuf Ankit & Co.) (201 Points)
18 November 2014Can a company appoint auditor for a term less than 5 years as per its policy of rotation of auditor keeping in mind provisions of Companies Act 2013? Is it mandatory to appoint auditors for a term of 5 years only?
P C Agrawal
(Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)
(8229 Points)
Replied 19 November 2014
If the company is covered by provision of rotation of auditors [Sec.139(2)] - it can appoint auditor for less than 5 years. However, it will be treated as one 'term' under the Section. In case of individual auditor, he cannot be reappointed for another term. In case of firm, it can be reappointed for another term (max.5 years).
If the company is not covered by provision of rotation of auditors, it will be covered u/s 139(1) and accordingly, will have to appoint auditor in first AGM till 6th AGM (i.e. 5 years or so). No other option has been provided in the Section.
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