Who can be appointed as Statutory Auditor?
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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