# Manner of Rotation of Auditors - Section 139(3) and Section 139(4)

Members of a company may resolve to provide additional safeguards for auditor rotation beyond statutory requirements.

## Members' Resolution under Section 139(3)

Members of a company may, by resolution, provide that:

1. In the audit firm appointed, the auditing partner and his team shall be rotated at such intervals as may be resolved by the members; OR

2. The audit shall be conducted by more than one auditor (i.e., joint audit).

## Recommendation Process

The Audit Committee (if it exists) shall recommend the manner of rotation.
If no Audit Committee exists, the BOD itself recommends.
The recommendation flows: Audit Committee → BOD → Shareholders (members) for resolution.

## Important Note on Joint Audit

In case of joint auditors, the rotation must be planned such that all joint auditors do not complete their term in the same year — this ensures continuity and avoids a complete change of audit team in one go.

## Summary Table

Scenario	Who Recommends	Who Decides
AC exists	Audit Committee → BOD	Shareholders by resolution
AC does not exist	BOD	Shareholders by resolution

## Flexibility for Members

Members may decide:

Internal rotation of auditing partner and team within the audit firm, OR
Appointment of joint auditors

This flexibility helps ensure independence and quality of audit beyond the basic statutory rotation under Section 139(2).

Worked example

### Example 1

Example 1: ABC Ltd. has appointed M/s X & Co. as its audit firm. The members wish to ensure that the same individual partner does not audit the company indefinitely. What can they do?

Solution: Under Section 139(3), members may pass a resolution that the auditing partner and his team within M/s X & Co. shall be rotated at such intervals as resolved by the members. This allows internal rotation within the firm without changing the firm itself.

### Example 2

Example 2: XYZ Ltd. appointed M/s P & Co. and M/s Q & Co. as joint auditors. Both firms were appointed in the same year and would complete 10 years in the same year. Is this permissible?

Solution: No. The rotation of joint auditors must be planned such that both joint auditors do not complete their term in the same year. The appointments should be staggered to ensure continuity in audit.

⚠️ Common exam mistakes

Assuming members MUST resolve for rotation under Section 139(3) — it is OPTIONAL (the word used is 'may').
Confusing Section 139(2) (mandatory rotation) with Section 139(3) (optional additional rotation by members).
In joint audit cases, appointing both joint auditors at the same time so they complete the term simultaneously — this defeats the purpose of staggered rotation.
Skipping the Audit Committee's recommendation step when AC exists.

Bare-Act text Section 139(3) and (4) · Companies Act, 2013 read with Rule 6 of Companies (Audit and Auditors) Rules, 2014 · click to expand

Section 139(3): Subject to the provisions of this Act, members of a company may resolve to provide that — (a) in the audit firm appointed by it, the auditing partner and his team shall be rotated at such intervals as may be resolved by members; or (b) the audit shall be conducted by more than one auditor. Section 139(4): The Central Government may, by rules, prescribe the manner in which the companies shall rotate their auditors in pursuance of sub-section (2).

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