Companies may choose to change their auditors for various reasons. Some common factors include:
Rotation Policies
In some jurisdictions, regulatory bodies require companies to rotate their audit firms periodically. This aims to enhance independence and objectivity in the audit process and prevent long-standing relationships between companies and auditors that could compromise impartiality.
Quality Concerns
Companies may opt for a change in auditors if they have concerns about the quality of services provided by their existing audit firm. This could involve issues such as recurring audit deficiencies, lack of industry expertise, or inadequate communication and responsiveness.
Mergers and Acquisitions
In cases of mergers, acquisitions, or corporate restructuring, a change in auditors is often necessary due to conflicts of interest or the need for a fresh perspective on the combined entity's financial statements.
Specialized Expertise
As businesses evolve, they may require auditors with specialized industry knowledge or experience. Companies might switch auditors to engage firms that have a deeper understanding of their specific industry, which can lead to more accurate and insightful financial reporting.
In order to act in compliance with the Companies Act, 2013, auditors must be replaced every five years in a company to maintain transparency in the operation. If in case there is no plan to make changes or replacement of the auditor then this decision must be taken in the Annual General Meeting and the resolution must be communicated to all the stakeholders.
