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January 24, 2018 at 10:10 pm #3879
Can a qualified company secretary be appointed as the statutory or external auditor of the company under the provisions of the latest Companies Act?
January 25, 2018 at 8:18 am #3880
Dr. Ashok DhamijaAdvocate
The eligibility, qualifications and disqualifications of auditors of a company are laid down in Section 141 of the Companies Act, 2013. As per this, only a chartered accountant (CA) can be appointed as the statutory auditor of a company. It is pertinent to point out that under Section 2(17) of the Companies Act, a “chartered accountant” means a chartered accountant as defined in the Chartered Accountants Act, 1949 who holds a valid certificate of practice under that Act;
A firm may also be appointed (by its firm name) as auditor of a company if the majority of its partners practising in India are qualified for appointment as such auditor. However, if a firm 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.
Thus, it should be clear that a Company Secretary is not entitled to be the statutory or external auditor of a company under the provisions of the new Companies Act, 2013.
It is noteworthy that sub-section (3) of the Companies Act lays down disqualifications as to which persons are not qualified to be auditors of a company (this would apply even if they be chartered accountants).
Section 141 is reproduced below:
“141. Eligibility, qualifications and disqualifications of auditors.—(1) A person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant:
Provided that a firm whereof majority of partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a company.
(2) 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.
(3) The following persons shall not be eligible for appointment as an auditor of a company, namely—
(a) a body corporate other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009);
(b) an officer or employee of the company;
(c) a person who is a partner, or who is in the employment, of an officer or employee of the company;
(d) a person who, or his relative or partner—
(i) 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:
Provided that the relative may hold security or interest in the company of face value not exceeding one thousand rupees or such sum as may be prescribed;
(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 such amount as may be prescribed; 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, for such amount as may be prescribed;
(e) 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;
(f) a person whose relative is a director or is in the employment of the company as a director or key managerial personnel;
(g) 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;
(h) 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;
(i) 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 in Section 144.
(4) 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.”
Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers.
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