Who can be appointed as Statutory Auditor?
A statutory auditor is a person chosen by a firm to examine the accuracy of the company’s accounting records. Only a practising Chartered Accountant (CA) is eligible to be appointed as a statutory auditor in a business, according to the Companies Act of 2013. A person is not eligible to be appointed as a statutory auditor of a company unless he or she is qualified to operate as an auditor. A Chartered Accountant business can also be designated as a company’s auditor. Only when the bulk of the partners is Chartered Accountants in India is such an appointment possible. In addition, the partners should be qualified for appointments in their particular capacities. Further, A limited liability partnership (LLP) can also be named as a firm’s auditor in its own right. To be eligible for appointment, all partners in the LLP must be practising as CPAs full-time.
Persons Disqualified for Appointment as Auditor
Persons or entities who are not competent to serve as a company’s auditor are prohibited from doing so:
- Any corporation, whether in business or practice, even if all of the directors or members are CAs.
- The company’s officer or employee
- A person who is a business partner or is employed by a corporate official or employee.
- A person, or his relative or partner, who owns or controls any security or interest in the company, its subsidiary, its holding or associate company, or a subsidiary of such holding company. The relative may, however, own security or interest in the company with a face value of not more than one thousand rupees.
- Over one lakh rupees in debt to the corporation, its subsidiary, its holding or associate company, or a subsidiary of such holding company
- The company, or its subsidiary, or its holding or associate company, or a subsidiary of such holding company, has given any guarantee or provided any security in connection with the indebtedness of any third party to the company, or its subsidiary, or its holding or associate company, or a subsidiary of such holding company, for an amount in excess of one lakh rupees.
- A person or a corporation that has a business relationship with the company, its subsidiary, its holding or associate company, or a subsidiary of such holding or associate company, whether directly or indirectly.
- A person who has a relative who is a director of works for the company as a director or senior managerial employee.
- A person in full-time work elsewhere, or a person or a partner of a company holding an appointment as its auditor, if such person or partner is holding an appointment as auditor of more than twenty corporations at the time of such appointment or reappointment.
- A person who has been convicted of a fraud-related offence by a court and has not served a ten-year sentence since the conviction.
- A person whose subsidiary, associate company, or another type of entity is engaged in delivering advisory and specialised services to the general public as of the date of appointment.
Restricted Services for Statutory Auditor
Auditors can only give services that have been approved by the company’s Board of Directors or audit committee. However, a firm’s auditor or its holding company or subsidiary company cannot perform the following services:
- Services in accounting or bookkeeping
- Services for internal auditing
- Actuarial services include the design and implementation of any financial information system.
- Advisory services for investments
- Services in investment banking
- Financial services that are outsourced
- Services in management
- Services aimed at advising directors or key management staff on tax-planning strategies
- Services in cost accounting or management consulting
Rishiraj is a keen learner and eager to learn more about the financial world. As a content writer at Finaxis, he hopes to capitalise on his newfound inclination for technology and language.