Qualification and Disqualification of Company Auditor

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Qualification and Disqualification of Company Auditor

Preface: This post was originally published in 2016 and has been updated on September 09, 2025, to provide you with the most current and accurate information.

Auditors play a vital role in corporate governance. A company auditor is like a doctor who checks the financial health of the company. In this blog post, we shall discuss the qualification and disqualification of a company auditor. If you are planning to appoint an auditor for your company, it is recommended that you go through this post!

Qualifications for Appointment as an Auditor

For appointment as an auditor, the following qualifications must be met:

• The person to be appointed as the company’s auditor shall be a Chartered Accountant (CA).

• A firm can be appointed as a company's auditor if the majority of its partners who are practicing in India are CAs.

• In the case of a Limited Liability Partnership (LLP), only those partners who are CAs are authorized to act as auditors and sign on the audit reports on the behalf of the firm.

If the individual/entity is found to be meeting the above criteria, they can be appointed as an auditor. 

Disqualifications for Appointment as an Auditor

The following persons are not eligible to be appointed as an auditor of the company:

• Any employee or officer of the company.

• A person who himself or his relative or partner is holding any shares in the company or any other company which is holding or subsidiary company. 

• A person who or whose relative or partner is indebted to the company or its subsidiary or its holding or associate company or a subsidiary of such holding company in excess of rupees five lakh shall not be eligible for appointment.

• A person who is an auditor of more than 20 companies.

• A person who is in full time employment elsewhere.

• A body corporate except LLP registered under LLP Act 2008.

• A person found guilty of fraud-related offense by the court and has not had ten years pass since the conviction date. 

Consequences of Disqualification of an Auditor

An individual who is appointed as company auditor must step down from his position if he becomes disqualified in any way after his appointment. Mentioned below is the list of services an auditor is prohibited from providing upon his disqualification:

• Financial statements’ Statutory Audit.

• Tax Audit under the Income Tax Act.

• GST Audit and Compliance Audit.

• Financial documents and returns’ certification.

• Audit of internal financial controls.

• Management Audit .

• Consolidated financial statements audit.

• Audit reports for regulatory authorities like RBI and SEBI

• Attestation services like certificates on net worth, turnover, utilization of funds, etc.

• Other services provided by an appointed auditor.

Conclusion

For a company to stay compliant, it is quite important that any proposed auditor meets all the required qualifications and does not fall under any disqualifications. Remember that only a practising Chartered Accountant is eligible to become an auditor. If an individual is not a practising Chartered Accountant, they cannot be appointed as an auditor at a company. Need assistance in fulfilling auditing requirements? Connect with our experienced professionals at Registrationwala for professional guidance and full support!

Frequently Asked Questions (FAQs)

Q1. Which Act governs appointment of auditors in India?

A. The Companies Act 2013 governs the appointment of the auditors in India.

Q2. Can a body corporate be appointed as an auditor at a company?

A. No, a body corporate cannot be appointed as an auditor, except when it is a Limited Liability Partnership.

Q3. What is the maximum number of companies an auditor can audit?

A. An auditor can audit a maximum of 20 companies at a time as per Section 141 of the Companies Act 2013.

Q4. Can only a practising CA be appointed as an auditor?

A. Yes, only a practising CA can be appointed as a company auditor.

Q5. Can a person be appointed as an auditor if their relative is a director or key managerial personnel in the company?

A. No, a person cannot be appointed as an auditor if their relative is a director or key managerial personnel in the company. This would lead to disqualification under Section 141 of the Companies Act 2013.

Q6. Can an existing officer or employee of a company be appointed as its auditor?

A. No, an officer or employee of a company cannot be appointed as its auditor.

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