Disqualification of Auditor

They are the following –

1. Body corporate can not be appointed as Auditor except limited liabilities partnership which is registered under LLP Act 2008 .
2. An Officer or An Employee of the company can not be appointed as an auditor .
3. Any officer or an employee or partner of an employee can not be appointed as auditor.
4. A person who , or his partner , or his relative ,is holding any security of or interest in  or is indebted to  or has given a guarantee or provided any security in connection with the indebtedness of any third person to the company , or its subsidiary, or of its holdingorassociatecompanyorasubsidiaryofsuchholdingcompany;
5. A person or a firm having Business relationship with the company .
6. Company’s director or key managerial person
7. A person who is in Full time employment
8. Convict of fraud
9. A person or firm , who , directly or indirectly renders any services referred to in section 144 .

 

Now let us understand all these disqualifications in detail ,

1. Body corporate can not be appointed as Auditor except limited liabilities partnership which is registered under LLP Act 2008 .
2. An Officer or An Employee of the company can not be appointed as an auditor .

Company ka koi officer ya employee khud company ka audit nahikarskate .

3. Any officer or an employee or partner of an employee can not be appointed as auditor.

For example , Mr. A ek chartered accountant hai  and he is a director of X ltd. , also he is a partner in ABC & CO. , ABC & CO. min 3 partners hain – Mr. A , Mr. B & Mr. C,

So in this case , Mr. A , being the director of the company , is not eligible to become the auditor of X ltd. , also , as per section 141 (3) , Mr. B & Mr. C , being the partners of Mr. A , are also not eligible to become the auditor of X.ltd .

Ques. Which of the following is disqualified for appointment as auditor of company

 a) Any officer or employee of Company

 b) Any officer or employee of holding Company of the Company

 c) Any officer or employee of subsidiary co of the Company

 d) All of these

Ans. is all of these

 

4. A person who , or his partner , or his relative ,is holding any security of or interest in  or is indebted to  or has given a guarantee or provided any security in connection with the in debted ness of any third person to the company , or its subsidiary, or of its holding or associate company or a subsidiary of such holding company;

inme se kisimeinbhi agar wo security holder haiyauska koi interest hai ,toh wo person us co. ka audit karnekeliye disqualified hai .

 

(ii) a person who, or his relative or partner is indebted to the company ,

5. Business relation
6. Company’s director or key managerial person
7. A person who is in Full time employment
8. Convict of fraud
9. A person or firm , who , directly or indirectly renders any services referred to in section 144 .

Section 144 - Services not to be rendered by auditor

1. Accounting and book keeping

2. Internal audit

3. Actuarial services

4. Investment advisory services or investment banking services

5. Designing of company’s IT system

6. or any kind of services as may be prescribed .

 

DICTATION -

The following persons shall not be eligible for appointment as an auditor of a company , namely -

a body corporate other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008;

an officer or employee of the company;

a person who is a partner, or who is in the employment, of an officer or employee of the company;

 

a person who, or his relative or partner-

is holding any security of or interest in the company or its subsidiary, or of its holding or associate company or asubsidiary of suchholding company;

It may be noted that the relative may hold security or interest in the company of face value not exceeding ` 1,00,000.

It may also be noted that the condition of ` 1,00,000 shall, wherever relevant, be also applicable in the case of a company not having share capital or other securities.

 

Students may also note that in the event of acquiring any security or interest by   a relative, above the threshold prescribed, the corrective action to maintain the limits as specified above shall be taken by the auditor within 60 days of such acquisition orinterest.

(ii) is indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of ` 5,00,000;or 

(iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the Company or its Subsidiary, or its Holding or Associate Company or a Subsidiary of such Holding Company, inexcess of

` 1,00,000.

 

1. a person who, or his relative or partner  -

a person or a firm who, whether directly or indirectly has business relationship with the Company, or its Subsidiary, or its Holding or Associate Company or Subsidiary of such holding company or associate company, of such nature as may be prescribed;

2. a person whose relative is a Director or is in the employment of the Company as a director or key Managerial Personnel.
3. a person who is in full time employment elsewhere or a person or a partner  of a firm holding appointment as its auditor, if such person or partner is at the date of such appointment or reappointment holding appointment as auditor of more than twenty companies other than one person companies, dormant companies, small companies and private companies having paid-up share capital less than ` 100 crore.
4. a person who has been convicted by a Court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction.
5. a person who, directly or indirectly, renders any service referred to in section 144 to the company or its holding company or its subsidiary company.

Section 144 of the Companies Act, 2013 prescribes certain services not to be rendered by the auditor. An auditor appointed under this Act shall provide to the company only such other services as are approved by the Board of Directors or the audit committee, as the case may be, but which shall not include any of the following services (whether such services are rendered directly or indirectly to the company or its holding company or subsidiary company), namely:

• accounting and book keeping services;
• internal audit;
• design   and   implementation of any financial information system;
• actuarial services;
• investment advisory services;
• investment banking services;
• rendering of outsourced financial services;
• management services; and

Subsequent Disqualification of an auditor

Section – 141 (4)

Subsequent disqualification ,

Where a person appointed as an auditor of a company incurs any of the disqualifications mentioned in sub-section

 (3) after his appointment, he shall vacate his office as such auditor and such vacation shall be deemed to be a casual vacancy in the office of the auditor.