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Auditor Rotation Tracker.

Section 139(2) of the Companies Act 2013 prescribes 5-year + 5-year terms with a 5-year cooling-off before re-appointment. This tracker tells you where the engagement stands.

Engagement details

Entity type

Rotation is mandatory for listed companies and prescribed unlisted companies per Rule 5 of Companies (Audit and Auditors) Rules 2014.

First appointment date

First term end date (5 years after appointment)

Re-appointed for second term?

Second term end date (10 years from appointment)

Status

Years since first appointment5.7 yrs

Currently onSecond 5-year term

Cooling-off begins on30 September 2030

Re-appointment eligibility from30 September 2035

How Section 139(2) rotation works.

Section 139(2) requires listed companies and prescribed unlisted companies to rotate their statutory audit firm after a maximum of two consecutive 5-year terms. After rotation, the outgoing firm cannot be re-appointed for at least 5 years. Network firms (firms under common control or sharing partners) are aggregated for this purpose — re-appointing a different firm in the same network does not reset the clock.

Thresholds for unlisted companies (Rule 5): public companies with paid-up capital ≥ ₹10 cr; private private limited companies with paid-up capital ≥ ₹20 cr; companies with public borrowings / deposits ≥ ₹50 cr.

On CORAA

Engagement acceptance, continuation, and rotation tracking sit inside the Setup hub. Pair with the Engagement Acceptance Checklist and the Independence Confirmation.

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How Section 139(2) auditor rotation works

Section 139(2) of the Companies Act 2013 mandates rotation of statutory auditors for certain classes of companies. An individual auditor cannot be appointed for more than one term of five consecutive years. An audit firm cannot be appointed for more than two terms of five consecutive years (10 years total). After the maximum term, the auditor is ineligible for reappointment in the same company for five years.

Rule 5 of Companies (Audit and Auditors) Rules 2014 specifies the classes of companies subject to rotation: all listed companies, all unlisted public companies with paid-up share capital of ₹10 crore or more, all private limited companies with paid-up share capital of ₹20 crore or more, and all companies (other than listed, one-person and small companies) with public borrowings (from banks / financial institutions / public deposits) of ₹50 crore or more.

The cooling-off period applies to the firm AND to any other firm having a "common partner" with the outgoing firm. This is the network-firm aggregation rule — designed to prevent the auditor from rotating through related firms. Audit committees and boards need to verify common-partner test before reappointment of any related firm.

Worked example — listed company

A listed company has had Firm A as its auditor for ten consecutive years (two terms of five years each). The company wishes to appoint a new auditor. A senior partner of Firm A is also a partner in Firm B.

Inputs

Outgoing firmFirm A — 10 years completed

Class of companyListed (rotation mandatory)

Proposed new firmFirm B

Common partner testCommon partner exists with Firm A

Output

Firm A reappointmentProhibited — 10 yr limit

Firm B eligibilityProhibited (common partner rule)

Cooling-off period5 years for both firms

RecommendationAppoint an unrelated firm

Firm A has exhausted both terms (10 years). Firm B is ineligible because of the common-partner rule under Section 139(2) read with Rule 5. After 5 years, Firm A becomes eligible again for reappointment. Firm B becomes eligible after the common partner exits Firm A. Document the common-partner search in audit committee minutes.

Common mistakes

Counting years before 1 April 2014 incorrectly

The transitional provisions under Rule 6 gave 3 years to comply with rotation. For an auditor appointed in 2010, the 5-year clock started from FY 2014-15 (transitional period) for computing the first term, NOT from the original appointment date. Many companies miscount the start.

Missing the network firm / common partner test

Rotation is not just from the appointed firm — any firm having a "common partner" at any time during the preceding three years is also ineligible. Document the common-partner test before any reappointment with a clean affirmation from the proposed firm.

Forgetting that audit-partner rotation is separate

Under ICAI Code of Ethics (Volume 1, Section 540 — Long Association of Personnel) for Public Interest Entities (listed entities and certain prescribed companies), the Key Audit Partner shall not serve more than seven years, with a cooling-off period before re-assignment as specified in the Code. This is separate from the firm rotation under Section 139(2) — even when the firm is in its first term, the audit partner may need rotation.

Not aligning with audit committee recommendation

Section 139(11) requires Audit Committee recommendation for appointment of auditors in companies covered by Section 177. Auditor changes that bypass the Audit Committee can be challenged. The board can override the recommendation only with reasons recorded.

Frequently asked questions

Which companies need to rotate auditors under Section 139(2)?+

Rule 5 of Companies (Audit and Auditors) Rules 2014: (a) all listed companies; (b) unlisted public companies with paid-up capital ≥ ₹10 cr; (c) private limited companies with paid-up capital ≥ ₹20 cr; (d) companies (other than listed, OPC and small) with public borrowings from banks / FIs / public deposits ≥ ₹50 cr.

What is the maximum term for an audit firm?+

Two terms of five consecutive years each — a maximum of 10 years. After 10 years, the firm becomes ineligible for reappointment in the same company for 5 years. An individual auditor (sole practitioner) is limited to one term of 5 years, with a 5-year cooling-off.

What is the "common partner" rule?+

On expiry of the maximum tenure of an audit firm in a company, any firm that has a "common partner" with the outgoing firm at any time during the preceding 3 years is also ineligible for appointment as auditor of the same company. This prevents rotation through related firms.

Does rotation apply to internal auditors?+

No — Section 139(2) and Rule 5 apply only to statutory auditors. Internal auditor appointment under Section 138 has no mandatory rotation. However, good governance practice often includes periodic rotation of internal auditors too.

Can the outgoing auditor become an internal auditor of the same company?+

No — Section 144 prohibits the statutory auditor (and the firm of which the auditor is a partner, and any other person directly or indirectly relating to the auditor) from rendering certain non-audit services to the same client, including internal audit. This restriction continues even after term completion.

What about audit-partner rotation (separate from firm rotation)?+

ICAI Code of Ethics (Volume 1, Section 540) — for audits of Public Interest Entities (PIEs), which includes listed entities and certain prescribed companies, the Key Audit Partner cannot serve more than seven years, after which a cooling-off period applies as specified in the Code. This requirement is independent of the firm rotation under Section 139(2) — even mid-firm-term, the engagement partner may need to be changed.

Are joint auditors subject to rotation?+

Yes — each joint auditor independently. If both joint auditors are firms, both are subject to the 10-year cap. The rotation timing may differ between them, but both must comply.

What is the casual vacancy rule?+

Under Section 139(8), casual vacancy due to resignation can be filled by the board within 30 days, subject to approval at the next general meeting within 3 months. The replacement auditor is appointed to hold office till the conclusion of the next AGM. Rotation rules apply to the replacement.

Authoritative sources

Section 139(2) + Rule 5 — Companies (Audit and Auditors) Rules 2014 — Read alongside SEBI LODR Reg 18 for listed entities (audit partner rotation), and ICAI Code of Ethics Volume I for related ethical considerations.

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

Related calculators

SA 220 — Quality Control for Audit →Section 197 Remuneration →CARO clause (xviii) — Auditor Resignation →Engagement letter template →

Last reviewed: 2026-05-28 · For informational purposes only — not professional advice.