Manner of rotation of auditors by the companies on expiry of their term :

A company shall follow the procedure prescribed under the Rule 6 of the Companies (Audit and Auditors) Rules,
2014 for the rotation of auditors under section 139(2).

• The Audit Committee shall recommend to the Board, the name of an individual auditor or of an audit firm who may replace the incumbent auditor on expiry of the term of such incumbent.

• Where a company is required to constitute an Audit Committee, the Board shall consider the recommendation of such committee, and 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.

• For the purpose of the rotation of auditors-

(i) 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 Act shall be taken into account for calculating the period of five consecutive years or ten consecutive years, as the case may be;

(ii) 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 which includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control.

• For the purpose of rotation of auditors,-

(i) a break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation;

(ii) 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.