Auditor Rotation Computation explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 6 of the Companies (Audit and Auditors) Rules, 2014 explains how a company rotates its auditors when their term expires. It tells the Audit Committee and the Board what to do, how earlier years are counted, who is barred as a replacement, and how joint auditors are treated. This article reads the rule as amended up to G.S.R. 359(E) dated 30 May 2025 (in force 14 July 2025) per the MCA e-book. Later amendments should be checked. For help planning an appointment, see our compliance advisory service.
The Audit Committee recommends to the Board the name of the individual auditor or audit firm to replace the incumbent (rule 6(1)); where there is no Audit Committee the Board considers it itself (rule 6(2)). Years served before the Act commenced count towards the "five consecutive years or ten consecutive years" (rule 6(3)(i)). An incoming auditor in the same network as the outgoing one is not eligible (rule 6(3)(ii)). A break of five years meets the rotation requirement (Explanation II(a)). Joint auditors may be rotated so that they do not all complete their term in the same year (rule 6(4)).
Who recommends and who decides: rule 6(1) and (2)
The Audit Committee recommends to the Board the name of an individual auditor or of an audit firm who may replace the incumbent on the expiry of the incumbent's term. Where a company is required to constitute an Audit Committee, the Board considers that recommendation. In other cases the Board itself considers the rotation and makes its recommendation for appointment of the next auditor by the members in the annual general meeting. So the members make the appointment; the Committee or Board only recommends.
Counting the years: rule 6(3)(i)
For rotation, the period for which the individual or firm has held office as auditor before the commencement of the Act is taken into account when calculating the period of five consecutive years or ten consecutive years, as the case may be. Two points:
- Earlier years are not wiped out by the new law. They count.
- The rule says "five ... or ten"; the five is for an individual and the ten is for a firm, as the two illustrations show. The section that sets those terms is section 139; see Section 139: appointment of auditor.
"Consecutive years", per the notes to both illustrations, means all the preceding financial years for which the auditor has been the auditor until there has been a break of five years or more. An individual auditor includes other individuals or firms whose name, trade mark or brand is used by that individual; an audit firm includes other firms whose name, trade mark or brand is used by the firm or any of its partners.
The two illustrations, in short
The rule prints two tables that show how long an auditor already in office may continue. They are described here in a few lines; read the original for the complete rows.
| Case | Years already served at the first AGM after section 139(2) began | Further years allowed | Total |
|---|---|---|---|
| Individual auditor | 5 years or more | 3 years | 8 years or more |
| Individual auditor | 4 years | 3 years | 7 years |
| Individual auditor | 3 years | 3 years | 6 years |
| Individual auditor | 2 years | 3 years | 5 years |
| Individual auditor | 1 year | 4 years | 5 years |
| Audit firm | 10 years or more | 3 years | 13 years or more |
| Audit firm | 8 years | 3 years | 11 years |
| Audit firm | 6 years | 4 years | 10 years |
| Audit firm | 5 years | 5 years | 10 years |
| Audit firm | 1 year | 9 years | 10 years |
The pattern: an individual with fewer than three years served gets up to five in total; an individual with more gets a further three years. A firm with fewer than seven years served gets up to ten in total; a firm with seven or more gets a further three years. The table is a transitional device for the first AGM after section 139(2) began, and the rule says so in its headings. Companies counting forward today use the rule's main text and the Act.
The network bar: rule 6(3)(ii) and Explanation I
The incoming auditor or audit firm shall not be eligible if it is associated with the outgoing auditor or firm under the same network of audit firms. "Same network" includes firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control. So replacing one firm with another firm of the same brand does not satisfy rotation.
Break and partner moves: Explanation II
- A break in the term for a continuous period of five years is taken as fulfilling the requirement of rotation.
- If a partner who is in charge of an audit firm and also certifies the financial statements of the company retires from that firm and joins another firm of chartered accountants, that other firm is also ineligible for five years.
The second point stops a partner from carrying the company's audit across to a new firm and starting the count again.
Joint auditors: rule 6(4)
Where a company has appointed two or more individuals or firms, or a combination, as joint auditors, it may follow the rotation in such a manner that both or all of the joint auditors do not complete their term in the same year. The rule says "may". It gives a way of staggering the exits so the company is not left without continuity.
Connected provisions
Selection and appointment, the ADT-1 filing and the classes of company to which rotation applies are in rules 1 to 5. Removal and resignation are in rules 7 to 9. Disqualification is in rules 10 and 10A. The auditor's duty to report fraud is in rules 13 and 14. The rule prints no form, fee or penalty.
Example
Northstar Auditors LLP has served Bharat Metals Limited for eight consecutive years, counting years before the Act. For the first AGM after section 139(2) began, the illustration for firms shows a further three years, a total of eleven. Suppose the firm retires and one of its partners, who certified the accounts, joins Summit & Co. Under Explanation II(b), Summit & Co. is also ineligible for five years. The Board should not recommend Summit & Co.
Common mistakes
- Ignoring years served before the Act commenced.
- Appointing a firm in the same network, brand or common control as the outgoing firm.
- Forgetting that a partner's move to another firm carries the bar with it for five years.
- Treating a break shorter than five years as a break.
- Letting joint auditors complete their terms in the same year when the company wants continuity.
- Treating the Audit Committee's recommendation as the appointment. The members appoint at the AGM.
Need help with auditor rotation?
Rotation needs a timeline, the Audit Committee's recommendation, the AGM notice and the filing after appointment. Our team can prepare the rotation plan and the papers well before the term ends.
Key takeaways
- The Committee, or the Board where there is no Committee, recommends; members appoint.
- Pre-Act years count towards the five or ten consecutive years.
- Same network, brand or common control makes the incoming firm ineligible.
- A five-year break meets rotation; a retiring partner's new firm is also barred for five years.
- Joint auditors can be staggered. Check later amendments.
Read next
- Section 139: appointment of auditor
- Audit Rules 1 to 5: appointment, ADT-1 and rotation classes
- Audit Rules 7 to 9: removal and resignation
- Audit Rules 10 and 10A: disqualifications
Disclaimer: This article is general information, not legal advice. It reads the rule as printed in the MCA consolidated text, as amended up to the notification named above; later amendments should be checked on the official MCA site before you file or act.