Module: | SEBI LODR & Corporate Governance Frameworks
Q9: Consider the following statements regarding the rotation of Statutory Auditors under the Companies Act for 2025:
1. An individual auditor cannot be appointed for more than one term of five consecutive years.
2. An audit firm is eligible to be appointed for two terms of five consecutive years.
3. The mandatory cooling-off period for both individual auditors and audit firms has been uniformly set to three years after the completion of their maximum tenure.
Which of the above statements is/are correct?
2. An audit firm is eligible to be appointed for two terms of five consecutive years.
3. The mandatory cooling-off period for both individual auditors and audit firms has been uniformly set to three years after the completion of their maximum tenure.
Which of the above statements is/are correct?
✅ Correct Answer: A
🎯 Quick Answer:
A. Only 1 and 2 are correct.Structural Breakdown: Statement 1 is correct.
Statement 2 is correct.
Statement 3 is incorrect; the mandatory cooling-off period is strictly five years.
Historical/Related Context: Introduced in the Companies Act 2013, the rules disrupted long-term relationships between conglomerates and specific audit firms.
Causal Reasoning: A five-year cooling-off period is enforced to ensure that the outgoing auditor loses all structural and personal influence over the company.