Module: | SEBI LODR & Corporate Governance Frameworks
Q25: Consider the following statements regarding the tenure and rotation of Secretarial Auditors under the amended Regulation 24A of SEBI (LODR), effective from April 1, 2025:
1. A Secretarial Audit firm (Partnership or LLP) registered with the ICSI can be appointed for a maximum of two consecutive terms of five years each.
2. An individual practicing Company Secretary can also be appointed as a Secretarial Auditor for up to two consecutive terms of five years each.
3. Any prior association of the Secretarial Auditor with the listed entity before March 31, 2025, is strictly counted when calculating their maximum allowed tenure under the new rules.
Which of the above statements is/are incorrect?
2. An individual practicing Company Secretary can also be appointed as a Secretarial Auditor for up to two consecutive terms of five years each.
3. Any prior association of the Secretarial Auditor with the listed entity before March 31, 2025, is strictly counted when calculating their maximum allowed tenure under the new rules.
Which of the above statements is/are incorrect?
✅ Correct Answer: B
🎯 Quick Answer:
B. Only 2 and 3 are incorrect.Structural Breakdown: Statement 1 is correct; audit firms can serve two terms of five years (10 years total). Statement 2 is incorrect; an individual Company Secretary in practice is restricted to only one term of five consecutive years.
Statement 3 is incorrect; SEBI explicitly clarified in its April 2025 FAQs that any association prior to March 31, 2025, is "grandfathered" and not considered for calculating the new tenure limits.
Historical/Related Context: Aligning with the statutory auditor rotation principles of the Companies Act, SEBI introduced these LODR amendments to prevent over-familiarity between management and compliance auditors.
Causal Reasoning: Enforcing strict tenure limits ensures that the secretarial auditor evaluates the company's legal compliances objectively, without the comfort or bias that stems from a perpetual, decades-long professional relationship.