Auditor's removal to be shareholder's discretion: House Panel

NEW DELHI, JUNE 29, 2012: THE long awaited report of the Standing Committee on Finance ("Committee") relating to Companies Bill, 2011 ("Bill") has been presented to the Hon'ble Speaker of Lok Sabha on 26 June, 2012. The Committee has been headed by the former Finance Minister Mr. Yashwant Sinha.

The Committee has recommended that the provisions of the existing Act where shareholders appoint auditors at every Annual General Meeting ("AGM") be continued in the interest of accountability to shareholders. It is further recommended that the proposal in the Bill for appointment of auditors for straight five years may be modified to the extent that the process is subject to ratification at every AGM.

Further, the Committee has recommended the rotation of audit partners instead of rotation of the audit firms. The Committee has suggested that this could be achieved by allowing members of the company to pass a resolution requiring the partner in an audit firm to be rotated at such interval as may be resolved by Members. These recommendations, if accepted, can have a substantial impact on the ongoing monopoly of the top audit firms and likely to ensure more transparency in their manner of functioning. The Committee has also suggested joint audits in case of very large entities.