# Manner of Rotation of Auditors

Section 139(3) gives the company an option (apart from the firm-level rotation) regarding how rotation is implemented. The flexibility depends on whether the company has an Audit Committee (AC).

## Who decides the manner of rotation?

The shareholders may resolve by an Ordinary Resolution at a general meeting that:

1. The audit 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 (joint auditors).

## Role of the Audit Committee

Situation	Procedure
If AC exists	AC recommends → Board considers → Shareholders resolve
If no AC	Board recommends directly → Shareholders resolve

## Important caveat on joint auditors

Where joint auditors are appointed as the manner of rotation, the company must ensure that all the joint auditors do not complete their term in the same year. In other words, the rotation must be staggered — otherwise, the very purpose of rotation is defeated.

## Quick recall structure

Trigger: Members' ordinary resolution
Inputs: AC recommendation (if AC exists), otherwise Board's view
Options: Rotate audit partner & team OR Joint auditors
Constraint on joint auditors: Don't let all of them retire together

Worked example

### Example 1

Example 1:

A listed company wants to ensure regular freshness in audit. Its Audit Committee recommends rotation of audit partner and team every 3 years. What is the procedure?

Answer: AC's recommendation goes to the Board → Board places before shareholders → Shareholders pass an Ordinary Resolution adopting the 3-year partner rotation cycle.

### Example 2

Example 2:

If a company appoints 2 joint auditors, X & Co. and Y & Co., and both were appointed in FY 2024-25 for 5 years, can both retire by rotation in FY 2029-30?

Answer: No. The terms must be staggered so that joint auditors do not complete their tenure in the same year. The company should adjust appointment timings so that the rotation is gradual.

⚠️ Common exam mistakes

Believing that a Special Resolution is needed — actually an Ordinary Resolution by members suffices for prescribing the manner of rotation.
Treating AC's recommendation as binding on the Board — it is to be 'considered', not mandatorily followed.
Forgetting the staggering requirement when joint auditors are appointed as the rotation mechanism.
Confusing 'manner of rotation' (Section 139(3)) with the 5-year/10-year individual/firm rotation cycle (Section 139(2)).

Bare-Act text Section 139(3) · Companies Act, 2013 · click to expand

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.

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Manner of Rotation of Auditors (Section 139)

Worked example

⚠️ Common exam mistakes