Rotation of Auditors

The final changes in the rules of the Indian Companies Act 2013 accounts for a threshold that is more practical for identifying the required class of companies on a broader scale. According to those rules, the unlisted public companies that have a paid up share capital of more than or equivalent to Rs.10 crores or more, will be liable to abide by an auditor rotation feature. The condition differs in case of private sector companies and those with public borrowings from financial institutions as the required paid up share capital limit for them is Rs.20 crores and Rs.50 crores respectively. Audit rotation appears to be quite a welcome change due to the fact that it increases the possibility of providing significant relief for smaller companies as well as their auditors. Another significant matter related to the audit rotation requirement is to evaluate the maximum term for the existing auditors according to their terms that they have been serving in the past. This particular requirement is a great medium that positively reinforces the intent of making the auditor rotation even more effective. The appointment of an auditor on a rotational basis can be decided through an ordinary resolution at an Annual General Meeting. In other words, unlike the previous fixed term appointments of the auditors, annual appointments will start to take place.