Only 18 per cent of Indian firms are ready for auditor rotation — made compulsory under the Companies Act, 2013 — said a recent survey conducted by Grant Thornton India in association with Prime Database.
According to Section 139 of the new Companies Act, every Indian company having a paid-up capital of Rs 20 crore or more that has kept the same audit firm for more than 10 years would need to change the auditor by the end of 2016-17. The provision on auditor rotation came into force on April 1, 2014, with the law giving such companies three years to change auditors.
“Nearly 82 per cent of the respondents are yet to start planning or have an informal plan agreed with the board of directors. Only 18 per cent have either appointed auditors to comply with mandatory firm rotation or have a comprehensive plan in place agreed with the board of directors/audit committee,” said the survey. The study was conducted from April to mid-June 2016. It had 10 questions and attracted 303 responses from various sectors of industry, including manufacturing, media and entertainment, technology, telecom and aviation.