The Institute of Chartered Accountants of India ( ICAI ) has withdrawn its recent clarification permitting a Company which ceases fall under the rotation principles under the Companies Act, 2013 to re-appoint an auditor.
A Chartered Accountant/ firm, an auditor in a company on which Rules relating to Rotation of auditors were applicable, retired in the year 2017 and a new auditor appointed in the same year.
After the amendment was brought as per Companies (Amendment) Act 2017, the company do not meet principles of rotation of auditors in the year 2018.
The ICAI, last week, clarified that the Corporate Laws & Corporate Governance Committee at its 43rd meeting held on 7th January, 2019 discussed the issue and was of the view that since the requirement of rotation of auditors is not applicable on the company subsequently, therefore the auditor who was the auditor in the company earlier in the year 2017 can be reappointed without prejudice to the other provisions of the Companies Act 2013.
“In other words, once a company ceases to fall under the ambit of Rotation principles, the company can appoint any chartered accountant/ firm as an auditor of the company irrespective of the fact that the same chartered accountant/ firm was an auditor of the company in previous years,” the ICAI said.
However, the ICAI has withdrawn its clarification on Friday and said that “The Corporate Laws & Corporate Governance Committee had issued the announcement regarding clarification on the applicability of Rotation principles on a company as per Section 139 of the Companies Act 2013 where the company ceases to fall under the ambit of Rotation principles in subsequent years on 29th January, 2019. The aforesaid Announcement is withdrawn and it shall not be taken in to effect.”