The Government of India, through the Ministry of Corporate Affairs (MCA), has tightened regulations surrounding auditor rotation in public limited companies to strengthen independence, transparency, and the credibility of statutory audits. Under the revised guidelines notified in September 2025, the provisions under Section 139 of the Companies Act, 2013, have been made more stringent, particularly for listed entities and companies of public interest. The amendments now include enhanced oversight mechanisms, stricter timelines, and penal consequences for companies and audit firms that fail to comply with mandatory rotation norms.

According to the revised rules, public limited companies must rotate their statutory auditors every 5 years, and audit firms cannot be reappointed in the same company for at least 5 more years (cooling-off period). Additionally, in cases where the audit firm is part of a larger network or has affiliations under a common brand, the entire network will be considered disqualified for reappointment during the cooling-off period. This provision is intended to prevent circumvention of the rules through internal restructuring within audit firms and to ensure genuine independence in auditor selection.

The MCA has also directed the Registrar of Companies (RoC) and the National Financial Reporting Authority (NFRA) to actively monitor auditor appointments and rotations through digital filings. Companies are now required to file a new Auditor Rotation Compliance Declaration (ARCD) within 15 days of the auditor’s appointment or reappointment. Non-compliance may result in penalties of up to ₹5 lakh for the company and ₹1 lakh per officer in default, along with potential blacklisting of the audit firm. Industry experts have welcomed this tightening of oversight as a robust step toward restoring trust in audit practices, especially in light of past corporate accounting scandals.