Company Law and Practice · Accounts and Auditors

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 till the sixth AGM. The first auditor is appointed by the Board. Listed companies and prescribed classes must rotate auditors. Section 141 decides who is eligible or disqualified.

Understand Appointment and Rotation of Auditors

An auditor checks the accounts on behalf of the members. So the law decides who can be an auditor, who appoints them, for how long, and when they must step aside. These rules sit in Sections 139 to 141. Removal and resignation sit in Section 140, which is not in the text supplied here, so this page states those rules in general terms only.

First auditor. The Board appoints the first auditor within 30 days of registration of the company. If the Board fails, it informs the members. They appoint the auditor at an extraordinary general meeting within 90 days. This auditor holds office till the conclusion of the first AGM. For a Government company, the Comptroller and Auditor-General of India (CAG) appoints the first auditor within 60 days of registration. If 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.

Subsequent auditor. At the first AGM, the members appoint an auditor who holds office from the conclusion of that meeting till the conclusion of the sixth AGM, and then for every sixth meeting after that. Before appointment, you must get the auditor's written consent and a certificate that the appointment meets the prescribed conditions and whether the auditor satisfies Section 141. The company informs the auditor and files a notice with the Registrar within 15 days of the meeting. For a Government company, CAG appoints within 180 days of the start of the financial year, and the auditor holds office till the AGM.

Rotation. A listed company, or a prescribed class of company, cannot appoint or re-appoint an individual for more than one term of five consecutive years. It cannot appoint an audit firm for more than two terms of five consecutive years. After the term, there is a cooling-off period of five years in the same company. A firm with a common partner to the firm whose tenure just ended also cannot be appointed for five years. Members may also resolve that the auditing partner and team rotate, or that more than one auditor conducts the audit.

Eligibility. Only a chartered accountant, or a firm where most partners practising in India are chartered accountants, can be auditor. Section 141(3) lists persons who are not eligible, such as an officer or employee of the company, or a person with a business relationship of the prescribed nature.

Key rules to remember

First auditor (non-Government company): Board appoints within 30 days of registration; if Board fails, members at EGM within 90 days; Holds office till the conclusion of the first AGM. Section 139(6).
First auditor (Government company): CAG within 60 days; else Board within next 30 days; else members at EGM within 60 days; Section 139(7). Applies to companies owned or controlled by the Central or State Governments.
Term of subsequent auditor: From the conclusion of the first AGM till the conclusion of the sixth AGM, then every sixth meeting; Section 139(1). Appointment includes re-appointment.
Notice to Registrar: Inform auditor and file notice with the Registrar within 15 days of the meeting; Written consent and certificate must be obtained before appointment.
Rotation limits: Individual: one term of 5 consecutive years. Audit firm: two terms of 5 consecutive years. Cooling-off: 5 years; Applies to listed companies and prescribed classes. Section 139(2).
Casual vacancy: Board fills within 30 days; if caused by resignation, approval of company at a general meeting within 3 months of Board's recommendation; Auditor holds office till the next AGM. For CAG-audited companies, CAG fills within 30 days, else Board within the next 30 days. Section 139(8).
Re-appointment of retiring auditor: Allowed if not disqualified, has not given written notice of unwillingness, and no special resolution appoints another or bars him; Section 139(9).
Ceiling on number of audits: Not eligible if holding appointment as auditor of more than 20 companies; Section 141(3)(g). Applies to a person or a partner of a firm, at the date of appointment or re-appointment.
Fraud conviction: Disqualified until 10 years have elapsed from the date of conviction; Section 141(3)(h).

How to solve Appointment and Rotation of Auditors questions

Use this method for any question on appointment, rotation or disqualification of auditors.

1Identify the type of appointment: first auditor, subsequent auditor, casual vacancy, or Government company.
2Identify who appoints: Board, members at AGM or EGM, or CAG.
3Note the time limit: 30, 60, 90 or 180 days, or 15 days for filing notice.
4Check eligibility under Section 141: chartered accountant or qualifying firm, then each disqualification in Section 141(3).
5If the company is listed or in a prescribed class, count consecutive terms and apply the rotation and cooling-off rules.
6State the provision, apply it to the facts, and give a clear conclusion citing the section.

Quickest way: Who, when, how long, who is barred

When to use it: Use for short case-based questions with limited time.

Write Who appoints, When (time limit), and How long (term).
Scan the facts for a disqualifying link: employee, relative as director or KMP, shares held, debt, business relationship, more than 20 companies, fraud conviction.
For rotation, count the years: 5 for an individual, 10 for a firm, then a 5-year gap.
Conclude in one line with the section number.

Common mistakes in Appointment and Rotation of Auditors

Saying the first auditor is appointed by members at the first AGM.
Students mix the first auditor with the subsequent auditor.
Fix: The Board appoints the first auditor within 30 days of registration. Members appoint at the first AGM the auditor who serves till the sixth AGM.
Applying the rotation rule to every company.
The rule is remembered without its scope.
Fix: Section 139(2) applies to listed companies and prescribed classes only.
Forgetting the cooling-off period or the common-partner rule.
Students stop at the term limit.
Fix: Add the 5-year bar on re-appointment in the same company, and the 5-year bar on a firm with a common partner to the outgoing firm.
Treating a relative's holding in the company as always disqualifying.
The proviso is skipped.
Fix: A relative may hold securities of face value not exceeding ₹1,000 or such sum as may be prescribed. The auditor's own holding is disqualifying.
Mixing the 20-company limit with the rotation rule.
Both are numbers linked to auditors.
Fix: The 20-company limit is a disqualification under Section 141(3)(g). The 5 and 10-year limits are rotation under Section 139(2).
Thinking a disqualification after appointment does not matter.
Students read only the eligibility test at the time of appointment.
Fix: Under Section 141(4), the auditor must vacate office. This is treated as a casual vacancy.

Worked examples

Example 1

Nova Textiles Ltd, a listed company, appointed CA Rohit Mehta as auditor for five consecutive years. At the next AGM, the members wish to re-appoint him for another five years. Advise.

Show the solution

Provision: Section 139(2)(a) says a listed company cannot appoint or re-appoint an individual as auditor for more than one term of five consecutive years.
Facts: Rohit Mehta is an individual and has completed one term of five years in a listed company.
Analysis: A further term would be a second term, which is not allowed. Under the proviso, he is not eligible for re-appointment in the same company for five years from the completion of his term.

Answer: The members cannot re-appoint CA Rohit Mehta. He becomes eligible again only after five years from the end of his term.

Example 2

Kaveri Foods Pvt Ltd was incorporated on 1 April. The Board did not appoint a first auditor. Who can appoint the auditor, and till when will the auditor hold office? Also, CA Sunil, whose brother is a director of the company, is proposed for appointment. Is he eligible?

Show the solution

Provision: Under Section 139(6), the Board appoints the first auditor within 30 days of registration. If it fails, it must inform the members.
The members then appoint the auditor at an extraordinary general meeting within 90 days. The auditor holds office till the conclusion of the first AGM.
Eligibility: Section 141(3)(f) bars a person whose relative is a director or is employed as a director or key managerial personnel of the company.
Facts: CA Sunil's brother is a director of the company, so Sunil falls under this bar.

Answer: The members appoint the first auditor at an EGM within 90 days, and the auditor holds office till the first AGM. CA Sunil is not eligible because his relative is a director.

Exam tips

Write the section number with each rule: 139 for appointment and rotation, 141 for eligibility.
Memorise the time limits as a short list: 30, 60, 90, 180 and 15 days.
In case questions, check each disqualification one by one and name the one that applies.
Give a firm conclusion in the last line, not just the rule.
For removal and resignation under Section 140, revise from the study material, as that section is not covered here.

Practice questions from Accounts and Auditors

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

What is the difference between a first auditor and a subsequent auditor?

The Board appoints the first auditor within 30 days of registration, and the auditor serves till the first AGM. Members appoint the subsequent auditor at the first AGM, for a term till the sixth AGM.

Does auditor rotation apply to all companies?

No. Section 139(2) applies to listed companies and to prescribed classes of companies. An individual can serve one term of five consecutive years and an audit firm two such terms.

Can a body corporate be appointed as an auditor?

No, except a limited liability partnership registered under the LLP Act, 2008. Under Section 141(3)(a), other bodies corporate are not eligible.

How many companies can an auditor audit?

A person or firm partner cannot be appointed if already holding appointment as auditor of more than twenty companies at the date of appointment or re-appointment, under Section 141(3)(g).

What happens if no auditor is appointed at an AGM?

Under Section 139(10), the existing auditor continues as the auditor of the company.