Who can be appointed as Statutory Auditor?

A statutory auditor of a company is a person appointed to verify the correctness of the accounting records of the company. As per the Companies Act, 2013, only a

practising Chartered Accountant (CA) is eligible to be appointed as the statutory auditor in a company. A person shall not be qualified for appointment as statutory auditor of a company unless there is eligibility on the part of the person to act in the capacity of an auditor. Also, a Chartered Accountant firm can be appointed as an auditor of a company. Such an appointment is possible exclusively when the majority of the partners are practising Chartered Accountants in India. The partners should also be qualified for appointment in their respective individual capacities. Further, a limited liability partnership (LLP) also can be appointed as the auditor of a firm in its own name. However, to qualify for appointment, all partners in the LLP should be engaged in full-time practice as CAs.

Persons Disqualified for Appointment as Auditor

The following types of persons or entities are debarred from being qualified for appointment as the auditor of a company:

Any body corporate, even if all the directors or members are CAs, whether in business or practice
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 a subsidiary of such holding company. However, the relative may hold security or interest in the company of face value not exceeding one thousand rupees
- Indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of one lakh rupees
- The giver of any guarantee, or has 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, for an amount which is in excess of one lakh rupees
A person or a firm who, whether directly or indirectly, has a business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company
A person whose relative is a director or is in the employment of the company as a director or key managerial personnel
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 persons or partner is at the date of such appointment or reappointment holding appointment as auditor of more than twenty companies
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
A person whose subsidiary or associate company or any other form of entity, is engaged as on the date of appointment in providing consulting and specialised services to the general public

Restricted Services for Statutory Auditor

Auditors of a company can only provide services that are approved by the Board of Directors of the Company or the audit committee. However, the auditor of a company cannot provide the following services to a company or its holding company or subsidiary company:

Accounting or book-keeping services
Internal audit services
Design and implementation of any financial information system
Actuarial services
Investment advisory services
Investment banking services
Outsourced financial services
Management services
Services which are intended to suggest tax-planning measures to the directors or key managerial personnel
Cost Accounting or Management Consultancy Services

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Frequently Asked Questions

Common questions about Statutory Auditor Eligibility & Restrictions in India.

According to the Companies Act, 2013, only a practicing Chartered Accountant (CA) or a Chartered Accountant firm where the majority of partners are practicing CAs, is eligible to be appointed as a statutory auditor of a company. A limited liability partnership (LLP) where all partners are engaged in full-time practice as CAs can also be appointed as a statutory auditor.

The article lists several categories of persons or entities that are disqualified from being appointed as a statutory auditor of a company. These include body corporates, officers or employees of the company, persons holding significant securities or interests in the company or its subsidiaries, persons indebted to the company beyond a certain limit, persons providing guarantees or securities to the company, and persons convicted of fraud offenses, among others.

No, a statutory auditor of a company can only provide services that are explicitly approved by the Board of Directors or the audit committee of the company. The article lists several services that a statutory auditor cannot provide to the company, its holding company, or subsidiary companies, such as accounting, internal audit, financial system design, actuarial services, investment advisory, and tax planning services.

No, a person who is in full-time employment elsewhere cannot be appointed as a statutory auditor of a company. The Companies Act disqualifies a person or a partner of a firm from being appointed as an auditor if they are already holding the position of an auditor in more than twenty companies at the time of appointment.

No, the Companies Act prohibits the appointment of a person whose relative is a director or in the employment of the company as a director or key managerial personnel, as a statutory auditor of that company.

No, a person or a firm whose subsidiary, associate company, or any other form of entity is engaged in providing consulting and specialized services to the general public, cannot be appointed as a statutory auditor of a company as per the Companies Act.

A Chartered Accountant firm can be appointed as a statutory auditor of a company only when the majority of the partners in the firm are practicing Chartered Accountants in India, and these partners are also individually qualified for appointment as statutory auditors.

Yes, a statutory auditor's relative can hold securities or interests in the company, but the face value of such securities or interests should not exceed one thousand rupees.

No, a statutory auditor cannot provide management services to the company, its holding company, or subsidiary companies, as per the list of restricted services mentioned in the article.

A person who is indebted to the company, its subsidiary, holding or associate company, or a subsidiary of its holding company, in excess of one lakh rupees, is disqualified from being appointed as a statutory auditor of that company.