The Standing Committee on Finance headed by Veerappa Moily has recommended that “justifiable relief” be extended to private companies and subsidiaries of foreign companies on the “auditor rotation” front.

The “justifiable relief” should depend upon their capital and turnover threshold, the panel said in a report on Companies (amendment) Bill 2016, which was tabled in the Lok Sabha on Wednesday.

Currently, auditor rotation norms under the Companies Act are applicable to all listed companies and bigger companies that is companies having thresholds with reference to paid-up share capital and public borrowings/deposits.

A stakeholder — whose identity was not revealed —had in a written submission to the panel suggested that auditor rotation should not be mandated for unlisted Indian subsidiaries of foreign multinationals.

Similarly, private limited companies should also be exempted from mandatory audit rotation since there is very little public interest involved in the same, it was submitted.

The Corporate Affairs Ministry — in response to this suggestion — felt that existing requirements of mandatory audit rotation should be retained for all companies including multinational companies as rotation of auditors is important to promote good corporate governance.

The standing committee felt “justifiable relief” was necessary for private companies and subsidiaries of foreign companies as only 1.6 per cent of total number of unlisted companies are required to rotate their auditors as per the criteria prescribed under the Companies Act 2013.

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