Govt rejigs mandatory rotation of auditors

New Delhi: The corporate affairs ministry is fine-tuning the provisions of the new Companies Bill over the mandatory rotation of statutory auditors every five years to make them more “practical”, MCA Minister Veerappa Moily said today.

“Not exactly diluted, it is being fine-tuned, working something more practical or do-able. A company cannot go with two-three auditors. Those who are (doing) business overseas should not face inconvenience,” Moily said on the sidelines of the AIMA Business Responsibility Summit in New Delhi.[caption id=“attachment_370103” align=“alignleft” width=“380”] Cleaning Companies Bill. Image courtesy PIB[/caption]

He was replying to a query if the MCA was looking to dilute the clause in the Companies Bill 2011 which prescribed that an audit firm as well the auditor should be rotated every five years.

Although the provision for rotation of auditors was approved by the Parliamentary Standing Committee on Finance that had earlier scrutinised the Bill, it did not find favour with industry, which said the rotation of audit firms would not serve any purpose.

It its latest report on the Companies Bill, the Committee has said that instead of year-to-year basis, an auditor can be appointment by members in general meeting for five years.

It said, “The procedure has been proposed to be modified in respect of appointment of auditors. It is proposed that shareholders may have the power to appoint auditors for straight five years, instead of on year to year basis.

“This would ensure that promoter/company/ management does not change auditor who is doing good job prematurely. Auditor’s early resignation and removal have been made possible.”

The new Companies Bill, which will replace a half-a-century old Act, is expected to be brought before Parliament for consideration and passage in the forthcoming session.

If passed, the bill will protect the rights of minority shareholders, bring about responsible self-regulation with adequate disclosure and accountability, and lesser government control over internal corporate processes.

The Companies Bill (2008), which lapsed with the dissolution of the 14th Lok Sabha, was reintroduced in the Lok Sabha in August 2009.

Subsequently, in August 2010 the Parliamentary Standing Committee on Finance gave its report after examining the provisions of the law.

PTI