Qualification and Disqualification of a Company Auditor [Auditing Notes BCOM]

Introduction

In this Article, we are going to discuss about Qualification and Disqualification of a Company Auditor. 

Qualification of a Company Auditor [Sec 141]

According to Section 141 of the Companies Act, 2013 the prescribed qualifications of an auditor are as follows:

a. An individual shall be eligible for appointment as an auditor of a company only if he is a chartered accountant.

b. A firm shall be eligible for appointment as an auditor of a company in the name of the firm only if majority of its partners are practicing in India as chartered accountants. Where a firm including a limited liability partnership is appointed as an auditor of a company, only the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm.

Disqualification of a Company Auditor [Sec. 141(3)]

According to section 141(3) of the Companies Act, 2013, the following persons shall not be appointed as auditors of a company:

1. A body corporate: A company other than a limited liability partnership cannot audit any other company,

2. An officer or employee of the company.

3. A person who is either a partner or employee of an officer or employee of the company.

4. A person who or his relative or his partner has taken debt from the company for amount exceeding Rs. 5,00,000.

5. A person who or his relative or his partner has taken guarantee of another person who has taken a loan exceeding Rs. 1,00,000 from the company.

6. A person who is or his relative or his partner is holding any security in the company or its subsidiary company or its holding company or its associate company or a subsidiary of such holding company.

7. A person whose relative is a director or is in the employment of the company as a director or key managerial personnel.

8. A person who has been convicted by a court of an offence involving fraud and a period of 10 years has not elapsed from the date of such conviction.

9. Any person whose subsidiary or associate company or any other form of entity, is engaged as on the date of appointment in consulting and specialised services as provided u/s 144.

10. A person, who is disqualified for being appointed as auditor of a company, is automatically disqualified for being auditor of its holding company or its subsidiary company or any other subsidiary of holding company.