ROTATION OF STATUTORY AUDITORS

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Finance Manager
24 Points Posted on 04 December 2024

Dear Professionals,

 

Please clarify.

A private limited company appointed an audit firm from 2014. The paid up capital is Rs 5 crores and Turnover is Rs 14 crores. The borrowings of the company exceeds Rs 50 crores on October 2024. Please suggest can the firm continue as statutory auditors upto 2025 since the borrowings trigger on october? Can the same audit firm be appointed as Statutory auditors for other term of five years from 2025? or new auditor to be appointed due to increase in borrowings.

Thanks in advance.

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On 04 December 2024 at 13:23 Report
Replies (2)
Quick Summary
This discussion clarifies the rules around the rotation of statutory auditors for private limited companies. Even though an audit firm was appointed in 2014, the company's borrowings exceeding £50 crores in October 2024 triggers a mandatory rotation requirement under the Companies Act, 2013. Consequently, the current audit firm cannot be re-appointed for another five-year term starting in 2025, and a new auditor must be appointed for the subsequent financial year.

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Master in Accounts & high court Advocate
7021 Points Posted on 04 December 2024

The Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, govern the appointment and rotation of statutory auditors. Eligibility and Rotation

1. *Eligibility*: The audit firm can continue as statutory auditors until the end of their term (2014-2025), provided they meet the eligibility criteria under the Companies Act, 2013. 

2. *Rotation*: Since the company's borrowings exceeded ₹50 crores in October 2024, the rotation requirement under the Companies Act, 2013, is triggered. 

The audit firm cannot be re-appointed for another term of five years from 2025.

Appointment of New Auditor 

1. *New Auditor*: The company must appoint a new auditor for a term of five years, starting from 2025. 

2. *Transition*: The existing audit firm will continue until the end of their term (2025). The new auditor will take over from the next financial year (2025-2026). Key Takeaways - The audit firm can continue until the end of their term (2025). -

 Due to the increase in borrowings, the company must appoint a new auditor for a term of five years, starting from 2025. -

The new auditor will take over from the next financial year (2025-2026). 

Reply
On 04 December 2024 at 15:08
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Master in Accounts & high court Advocate
7021 Points Posted on 04 December 2024

The Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, govern the appointment and rotation of statutory auditors. Eligibility and Rotation

1. *Eligibility*: The audit firm can continue as statutory auditors until the end of their term (2014-2025), provided they meet the eligibility criteria under the Companies Act, 2013. 

2. *Rotation*: Since the company's borrowings exceeded ₹50 crores in October 2024, the rotation requirement under the Companies Act, 2013, is triggered. 

The audit firm cannot be re-appointed for another term of five years from 2025.

Appointment of New Auditor 

1. *New Auditor*: The company must appoint a new auditor for a term of five years, starting from 2025. 

2. *Transition*: The existing audit firm will continue until the end of their term (2025). The new auditor will take over from the next financial year (2025-2026). Key Takeaways - The audit firm can continue until the end of their term (2025). -

 Due to the increase in borrowings, the company must appoint a new auditor for a term of five years, starting from 2025. -

The new auditor will take over from the next financial year (2025-2026). 

Reply
On 04 December 2024 at 15:10

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