CAIIB JUNE SHORT NOTES 2023 | Rotation Of Auditors
This article focuses on the CAIIB JUNE 2023 exam’s topic, i.e., Rotation Of Auditors, and an idea of CAIIB JUNE study material 2023.
The IIBF takes the CAIIB exam twice a year. Since its founding in 1928, the IIBF has brought together about 700 banks and financial organisations. The CAIIB exam, one of the flagship courses offered by the IIBF, is intended to help current members get the most out of their membership. This study attempts to review and contrast a number of approaches for developing flexible and all-encompassing financial management. For this course, there are four obligatory papers and one optional paper. The CAIIB certification is well-known in the financial & banking industry and is considered to produce distinctive, dynamic knowledge and talents.
The CAIIB exam for June 2023 is approaching, and we have excellent CAIIB study materials for that exam to assist you with your preparation, which we will discuss later in this article. However, before we do that, we want to give you some insight into the Rotation of Auditors, one of the most crucial topics of the CAIIB exam for June 2023.
Every company incorporated under the Companies Act is required to have its annual financial statements audited by a statutory auditor and presented to interested parties. Every organisation should conduct regular audits, and the auditor must deliver his findings objectively.
In order to prevent long-term connections between an auditor and the client, the audit rotation principle mandates regular intervals between audit engagements. A key provision to improve audit quality and preserve the confidence of various stakeholders in the organisation is audit breaks/rotation.
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AUDITOR ROTATION APPLICABILITY
The Companies Act of 2013’s Section 139(2) mandates that listed and specific classifications of companies rotate their auditor or audit firm. According to the Section, no listed company or company belonging to the stated class or classes of companies may appoint or reappoint.
- A person serving as auditor for more than one term over a period of five straight years, or an audit firm serving as auditor for more than two terms over a period of five straight years
As a result, all listed companies, as well as any other class of companies that may be prescribed, are subject to the rotation of auditors. Rule 5 of the 2014 Companies (Audit and Auditors) Rules has a list of “such other classes of Companies.”
The following businesses are eligible for auditor rotation, with the exception of small companies and one person company
|Sr.No||Category of Company||Threshold limit|
|1.||Unlisted public companies||Paid capital of Rs. 10 crores or more|
|2.||Private limited companies||Paid capital of Rs. 50 crores or more|
|3.||Any company that has public borrowings from financial institutions, banks, or public deposits but has paid up capital that is below the threshold restrictions described in points (1) and (2) above||Rs. 50 crores or more|
REAPPOINTMENT OF AUDITOR IN SAME COMPANY
The first provision of Section 139(2) states that the departing auditor shall not be eligible for reappointment in the same firm following the conclusion of the audit term (5 consecutive years or ten consecutive years, as the case may be).
- In the event of a personal audit.
- Five years after the conclusion of his term.
- Regarding the Audit Firm.
- Five years after the conclusion of his term.
As a result, after the audit term is over, a cooling-off time of 5 years is offered before being qualified for reappointment as an auditor in the same company.
ROTATION OF AUDITORS ONCE THEIR TERMS HAVE EXPIRED
The way that businesses rotate their auditors once their terms have expired.
- The Board or the Audit Committee, if there is one, will decide whether to rotate the auditors and will make that recommendation at the company’s annual public meeting.
- Prior Period should be taken into account:
- The last time, before the Act’s came into force, during which the Auditor (whether an individual or firm) functioned, shall be taken into consideration for determining the consecutive five years or ten years.
- If you are a member of the same network, you are not eligible for an appointment.
- If the incoming auditor or any firm partners are connected to the departing auditor or auditor firm through the “same network of audit firms,” they are ineligible for an appointment.
- According to Rule 6(3) of the Companies (Audit and Auditors) Rules, 2014, the time that a person or company held office as an auditor previous to the start of the Act shall be taken into consideration for determining the period of five consecutive years or ten consecutive years, as the case may be.
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ADDITIONAL CRUCIAL ROTATION CLAUSES
- A partner who confirms the company’s financial statements switches audit firms.
- According to Rule 6’s explanation, a firm is ineligible for an appointment if a partner of an existing firm (the “outgoing firm”) who certifies the company’s financial statements retires from the former firm and joins a different firm of Chartered Accountants. This company will be disqualified from future appointments for a period of five years.
- Consecutive years are defined as all prior financial years for which a specific auditor served as auditor, up until a hiatus of five years or more.
- When a company names two or more people or firms, or a combination of both, as joint auditors, the company may follow the audit committee rotation so that neither one nor all of the joint auditors, depending on the situation, finish their terms in the same year.
- Audit Period Among Partners. The organization’s members could decide on:
- a) The auditing partner and his team in the audit firm chosen by it shall rotate at such intervals as may be determined by members.
- b) More than one auditor must do the audit.
- Rotation of auditors is applicable in the case of a private limited firm.
- According to Rule 5 of the Businesses (Audit and Auditors) Rules, 2014, the appointment of an auditor is necessary for private limited companies if,
- The company has at least Rs. 50 crore as paid-up share capital.
- Has at least 50 crore rupees in public borrowings from banks, financial institutions, or public deposits.
Companies that fall below the aforementioned threshold restrictions, tiny businesses, and one-person operations are exempt from the rules governing the rotation of auditors and audit firms. In such firms, the auditor may serve as an auditor for any number of years.
CAIIB JUNE 2023 STUDY MATERIAL
We at Learning Sessions provide services like
- Recorded video lectures that may be downloaded and accessed at your convenience are available in our CAIIB June study material 2023.
- Additionally, live sessions are held for all the topics under every CAIIB June 2023 exam subject.
- You can quickly review the topics thanks to the brief and simple notes that are complementary to our video lectures. These notes are available in the form of epdfs which are accessible on our apps.
- These notes can be found on our applications, which are provided at the end of the article.
- You can also take the CAIIB Mock tests 2023, which includes memory-based previous years questions and Case Studies.
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