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CS Executive · Company Law and Practice · Accounts and Auditors

Meridian Pharma Ltd, a listed company, appointed Mr. Arvind Rao, a chartered accountant practising individually, as auditor for one term of five consecutive years. Which statement correctly describes his position at the end of that term under the Act?

An individual auditor of a listed company can serve only one term of five consecutive years. After completing that term he is not eligible for re-appointment as auditor in the same company for five years. The two-term allowance applies only to audit firms.

  1. AHe may be re-appointed for one more term of five years
  2. BHe cannot be re-appointed in the same company for five years from completing his termCorrect
  3. CHe cannot be re-appointed in the same company for three years from completing his term
  4. DHe may be re-appointed only if the members pass a special resolution

Explanation

A listed company cannot appoint or re-appoint an individual as auditor for more than one term of five consecutive years. After completing the term, the individual is ineligible for re-appointment in the same company for five years. The two-term option applies to audit firms, not individuals.

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