Corporate and Economic Laws · Accounts and Audit

Appointment and Rotation of Auditors under the Companies Act, 2013

Updated 11 October 2026 · Fact-checked

Under Section 139, a company appoints an individual or firm as auditor at its first AGM for a term ending at the sixth AGM. Listed companies and prescribed classes must rotate: one five-year term for an individual, two for a firm. Section 140 governs removal and resignation.

Understand Appointment and Rotation of Auditors

Every company needs an auditor who is independent of the management. The Act therefore controls who appoints the auditor, for how long, and how the auditor can leave. Section 139 deals with appointment and rotation. Section 140 deals with removal, resignation and special notice.

The first auditor is appointed before the first AGM. For a non-government company, the Board appoints the first auditor within 30 days of registration. If the Board fails, it informs the members, who must appoint the auditor within 90 days at an extraordinary general meeting. This auditor holds office till the conclusion of the first AGM. For a Government company, the Comptroller and Auditor-General (CAG) appoints the first auditor within 60 days of registration. If the CAG does not, the Board appoints within the next 30 days. If the Board also fails, the members appoint within 60 days at an EGM.

After that, the company appoints an auditor at the first AGM. The auditor holds office from the conclusion of that meeting till the conclusion of its sixth AGM, and thereafter for every sixth meeting. Before appointment, you must obtain the auditor's written consent and a certificate that the appointment is within the prescribed conditions. The certificate must also say whether the auditor satisfies the criteria in Section 141. The company informs the auditor and files a notice with the Registrar within 15 days of the meeting. For Government companies, the CAG appoints the auditor within 180 days of the start of the financial year, and the auditor holds office till the conclusion of the AGM.

Rotation applies to listed companies and prescribed classes. An individual cannot be appointed for more than one term of five consecutive years. An audit firm cannot be appointed for more than two such terms. After completing the term, the individual or firm is ineligible for re-appointment in the same company for five years. A firm with a common partner with the outgoing firm cannot be appointed for five years either. The Act includes an LLP within the word firm.

Removal before the term ends needs a special resolution of the company and the previous approval of the Central Government, after giving the auditor a reasonable chance to be heard. An auditor who resigns must file a statement with the company and the Registrar within 30 days, giving reasons.

Key rules to remember

Auditor's term: First AGM appointment → till conclusion of 6th AGM; Applies to appointment under Section 139(1). Appointment includes re-appointment.
Rotation limit: Individual: 1 term of 5 years; Firm: 2 terms of 5 years; For listed companies and prescribed classes. Cooling-off period of 5 years in the same company.
First auditor (non-government company): Board: 30 days from registration → members at EGM: 90 days; Holds office till conclusion of first AGM.
First auditor (Government company): CAG: 60 days → Board: next 30 days → members at EGM: 60 days; Holds office till conclusion of first AGM.
Casual vacancy (non-CAG company): Board fills within 30 days; if by resignation, general meeting approval within 3 months of Board recommendation; Auditor holds office till next AGM. For CAG-audited companies the CAG fills within 30 days, else the Board within the next 30 days.
Removal: Special resolution + prior Central Government approval + hearing; Section 140(1).
Resignation filing: Statement within 30 days to company and Registrar; Also to the CAG for Government companies. Penalty is ₹50,000 or the auditor's remuneration, whichever is less, plus ₹500 per day after the first, subject to a maximum of ₹2,00,000.
Notice to Registrar: Within 15 days of the meeting appointing the auditor; The company must also inform the auditor.

How to solve Appointment and Rotation of Auditors questions

Most questions give a company situation and ask whether an appointment, removal or resignation is valid. Work through the facts in order.

1Identify the type of company: Government company, listed or prescribed class, or other.
2Identify the stage: first auditor, appointment at AGM, casual vacancy, removal or resignation.
3Pick the right authority: Board, members, CAG or Central Government.
4Apply the time limit for that stage, such as 30 days, 60 days, 90 days or 15 days.
5For rotation, count the consecutive terms already served and check the cooling-off period of five years.
6Check the procedural conditions: consent, certificate, special resolution, special notice, Audit Committee recommendation.
7State your conclusion and the consequence, and quote the section.

Quickest way: Stage-authority-time grid

When to use it: Use it for fact-based MCQs and short case questions where you must find the valid step quickly.

Write the stage in a few words: first, regular, casual, removal or resignation.
Next to it, write who acts and the days allowed.
Check rotation only if the company is listed or of a prescribed class.
Match the facts against the grid and mark the breach.

Common mistakes in Appointment and Rotation of Auditors

Saying the auditor serves for five years under Section 139(1).
Students mix the term of appointment with the rotation limit.
Fix: The term is till the sixth AGM. The five-year limit is only the rotation term for listed and prescribed companies.
Applying rotation to all companies.
The rule is remembered without its condition.
Fix: Section 139(2) applies to listed companies and prescribed classes only.
Forgetting Central Government approval for removal.
Students remember only the special resolution.
Fix: Removal needs both a special resolution and previous Central Government approval, after a hearing.
Mixing the first auditor timelines of private and Government companies.
Both have several time limits with similar numbers.
Fix: Remember the sequence: Board 30 days, members 90 days; CAG 60 days, Board 30 days, members 60 days.
Treating a casual vacancy by resignation like any other vacancy.
The extra approval step is missed.
Fix: If the vacancy arises from resignation, the Board's appointment must also be approved by the company at a general meeting within three months of the Board's recommendation.
Thinking a company with no auditor appointed at an AGM is left without one.
Students overlook Section 139(10).
Fix: The existing auditor continues if no auditor is appointed or re-appointed at the AGM.

Worked examples

Example 1

Sunrise Ltd, a company incorporated on 1 June, did not have its Board appoint a first auditor within the permitted time. The Board informs the members on 15 July. By what date must members appoint the auditor, and how? Assume the company is not a Government company.

Show the solution

The Board must appoint the first auditor within 30 days of registration.
The Board failed, so it must inform the members.
The members must appoint the auditor within 90 days.
They must do so at an extraordinary general meeting.
The auditor holds office till the conclusion of the first AGM.

Answer: The members must appoint the first auditor at an EGM within 90 days, and the auditor holds office till the conclusion of the first AGM.

Example 2

Bharat Power Ltd, a listed company, has had CA Rao & Co., an audit firm, as auditor for two consecutive terms of five years. The Board proposes to re-appoint the firm for a third term. Advise. Also state whether the company can remove an auditor before the term ends.

Show the solution

The company is listed, so Section 139(2) applies.
An audit firm cannot be appointed for more than two terms of five consecutive years.
The firm has completed two terms, so it cannot be re-appointed for a third term.
It is also ineligible for re-appointment in the same company for five years from completion of its term.
A firm having a common partner with it also cannot be appointed as auditor of the same company for five years.
On removal: the company may remove an auditor before expiry only by a special resolution, after previous Central Government approval and giving the auditor a reasonable opportunity of being heard.

Answer: The re-appointment is not permitted. The firm must wait five years. Early removal needs a special resolution and previous Central Government approval.

Exam tips

Learn the numbers as a set: 30, 60, 90, 180 days, 15 days, 5 years, sixth AGM.
In case studies, first check whether the company is listed or Government, since that changes the rule.
Write the authority for each step: Board, members, CAG or Central Government.
Quote Sections 139 and 140 in written answers, but only where you are sure of the section.

Practice questions from Accounts and Audit

Appointment and Rotation of Auditors in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Appointment and Rotation of Auditors: frequently asked questions

For how long is an auditor appointed under Section 139?

The auditor holds office from the conclusion of the first AGM till the conclusion of the sixth AGM, and thereafter for every sixth meeting. The company may remove or the auditor may resign earlier as the Act allows.

Does auditor rotation apply to every company?

No. It applies to listed companies and companies of classes prescribed. In those companies an individual gets one five-year term and a firm gets two.

How can an auditor be removed before the term ends?

By a special resolution of the company after previous Central Government approval. The auditor must first get a reasonable opportunity of being heard.

What must a resigning auditor do?

The auditor must file a statement with the company and the Registrar within 30 days of resignation, giving reasons. In Government companies, the CAG must also get it. Failure attracts a penalty.