Quick answer
What are the qualifications and disqualifications of auditor under the Companies Act, 2013?
Under section 141, only a chartered accountant, or a firm or LLP whose majority of partners practising in India are chartered accountants, can be a company auditor. The qualifications and disqualifications of auditor rule out body corporates, the company's officers or employees, their partners or employees, people with financial interests or business ties, relatives of directors and fraud convicts.
- Qualification: chartered accountant; firm or LLP by majority
- Only CA partners can sign for a firm or LLP
- Nine classes of persons barred under section 141(3)
- Disqualified after appointment: auditor must vacate office
What are the qualifications and disqualifications of auditor under section 141?
Section 141 has four parts. Sub-sections (1) and (2) say who may be appointed as a company auditor, sub-section (3) lists who may not, and sub-section (4) says what happens when an auditor becomes disqualified after appointment. Rule 10 of the Companies (Audit and Auditors) Rules, 2014 adds money limits.
The purpose is independence. A statutory auditor reports to the shareholders on whether the financial statements give a true and fair view. That opinion is only worth something if the auditor has no job, debt, investment, family tie or business deal that could bend it.
These rules apply to every company that must appoint an auditor, from a one person company to a listed group. Statutory audit is work reserved for chartered accountants: it must be carried out and signed by a practising CA, which is why this site gives information on it but does not take on audit work.
Who can be appointed as a company auditor?
Only a chartered accountant can be appointed as auditor of a company. A firm, including a limited liability partnership, can be appointed in its firm name if a majority of its partners practising in India are qualified for appointment.
When a firm or LLP is appointed, only the partners who are chartered accountants may act and sign on its behalf. So a multi-disciplinary LLP with lawyers or company secretaries as partners can hold an audit, but the audit report must be signed by a CA partner.
| Rule | What it says | Section |
|---|---|---|
| Individual auditor | Must be a chartered accountant | 141(1) |
| Firm or LLP | Can be appointed by firm name if a majority of its partners practising in India are qualified | 141(1), proviso |
| Who signs | Only partners who are chartered accountants may act and sign for the firm or LLP | 141(2) |
| Body corporate | Not eligible, except an LLP | 141(3)(a) |
Source: section 141 of the Companies Act, 2013 (official text on indiacode.nic.in and mca.gov.in; read October 2026 through the reproduction at corporatelawreporter.com because the official sites did not load). Check the current text on India Code.
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Who is disqualified from being a company auditor?
Section 141(3) lists nine classes of persons who cannot be appointed as auditor of a company. Most cover conflicts of interest: employment, money owed, investments, guarantees, business deals and family ties. One covers too many audits and one covers fraud convictions.
| Clause | Who cannot be appointed | In plain English |
|---|---|---|
| (a) | A body corporate other than an LLP | A company cannot be an auditor; an LLP of CAs can |
| (b) | An officer or employee of the company | Staff cannot audit their own employer |
| (c) | A partner, or employee, of an officer or employee of the company | No audit by someone tied to the company's staff |
| (d)(i) | A person who, or whose relative or partner, holds securities of or interest in the company, its subsidiary, holding or associate company | No investment link (relatives get a small limit under Rule 10) |
| (d)(ii) | A person who, or whose relative or partner, is indebted to the company or those group companies above the prescribed amount | No borrowing from the client above ₹5 lakh |
| (d)(iii) | A person who, or whose relative or partner, has given a guarantee or security for a third person's debt to those companies above the prescribed amount | No guarantees above ₹1 lakh |
| (e) | A person or firm with a business relationship of the prescribed kind with the company or group companies | No commercial dealings beyond permitted ones |
| (f) | A person whose relative is a director, or is employed as a director or key managerial personnel | No audit where family runs the company |
| (g) | A person in full-time employment elsewhere, or holding auditor appointments in more than twenty companies | A cap on the number of company audits |
| (h) | A person convicted of an offence involving fraud, for ten years from conviction | A ten-year bar after a fraud conviction |
| (i) | A person whose subsidiary, associate or other entity provides services barred by section 144 on the date of appointment | No audit while a related entity sells barred services to the company |
Source: section 141 of the Companies Act, 2013 (official text on indiacode.nic.in and mca.gov.in; read October 2026 through the reproduction at corporatelawreporter.com because the official sites did not load). Check the current text on India Code.
What limits does Rule 10 set for relatives, loans and guarantees?
Rule 10 of the Companies (Audit and Auditors) Rules, 2014 puts numbers on the section 141 disqualifications. A relative of the auditor may hold securities of face value up to ₹1 lakh, debt above ₹5 lakh disqualifies, and a guarantee or security above ₹1 lakh disqualifies.
If a relative's holding crosses ₹1 lakh face value, the auditor gets 60 days to take corrective action. The "business relationship" bar covers any transaction for a commercial purpose, with two exceptions: professional services that an auditor may lawfully provide under the Companies Act and the Chartered Accountants Act, 1949, and ordinary purchases as a customer at arm's length, such as telecom, airline, hospital or hotel services.
| Item | Limit | Applies to |
|---|---|---|
| Securities held by a relative | Face value up to ₹1 lakh; corrective action within 60 days if exceeded | Section 141(3)(d)(i) |
| Indebtedness to the company or group | Disqualified above ₹5 lakh | Section 141(3)(d)(ii) |
| Guarantee or security for a third person's debt | Disqualified above ₹1 lakh | Section 141(3)(d)(iii) |
| Business relationship | Any commercial transaction, except permitted professional services and arm's-length customer purchases | Section 141(3)(e) |
Source: Rule 10, Companies (Audit and Auditors) Rules, 2014, read October 2026 through corporatelawreporter.com; confirm on mca.gov.in.
How does the twenty-company limit work?
Under section 141(3)(g), a person, or a partner of a firm, cannot hold auditor appointments in more than twenty companies. Commentaries on the 2017 amendment say the count excludes one person companies, dormant companies, small companies and private companies with paid-up share capital below ₹100 crore.
So a CA in Delhi who mainly audits small private companies may hold many more than twenty audits without breaching the limit, while a partner auditing several larger companies has to count carefully. For a firm, the limit is applied per partner. When you ask an audit firm to accept your appointment, it is fair to ask whether the signing partner is within the limit.
The exclusions above come from published commentary on the Companies (Amendment) Act, 2017 (effective 9 February 2018); check the current section text on India Code.
What happens if an auditor becomes disqualified after appointment?
Under section 141(4), an auditor who becomes subject to any disqualification after appointment must vacate office, and the vacancy is treated as a casual vacancy. The company then appoints a new auditor under the casual vacancy rules in section 139.
Typical examples: the audit partner's relative is appointed a director of the company, or a relative's shareholding grows past ₹1 lakh face value and is not corrected within 60 days. The auditor cannot carry on until year end. Section 147 of the Act sets penalties for breaches of the auditor provisions in sections 139 to 146, for both the company and the auditor, so neither side gains by ignoring a disqualification.
Before appointment, the auditor gives the company written consent and a certificate that the appointment satisfies the conditions of the Act. Keep that certificate with the board and AGM papers.
Which services cannot your statutory auditor provide?
Section 144 lists services that a company's auditor may not provide to the company, such as accounting and bookkeeping and internal audit, and section 141(3)(i) disqualifies an auditor whose related entity provides those services on the appointment date.
This matters for small companies in Delhi that like to keep "one CA for everything". If the same firm writes up your books, it generally should not also sign your statutory audit. A practical split is one firm for accounting and bookkeeping and ROC filings, and an independent practising CA for the statutory audit. Read the full list in section 144 with your auditor, since some services are allowed with board approval.
How to check an auditor before appointing one
Use section 141 as a checklist when your board picks a statutory auditor. It takes a few minutes and avoids a forced change in the middle of an audit cycle.
- 1
Verify the CA or firm
Search the member or firm on ICAI's CA Connect portal (caconnect.icai.org) and confirm practising status.
- 2
Ask for the eligibility certificate
The auditor gives written consent and a certificate that the appointment meets the Act's conditions; read it.
- 3
Check relationships
Ask about relatives on your board or staff, shareholdings, loans, guarantees and business dealings with your group.
- 4
Check the audit count
Ask whether the signing partner is within the twenty-company limit after the permitted exclusions.
- 5
Separate barred services
Confirm that neither the firm nor its associates provide section 144 services, such as bookkeeping or internal audit, to you.
- 6
Record the appointment
Pass the board or AGM resolution and complete the related ROC filing with your company secretary or compliance team.
Common mistakes when choosing a statutory auditor
The most common mistake is appointing the firm that keeps the books or a relative of a director, which section 141 and section 144 do not allow. The second is never asking for the eligibility certificate.
- Appointing a CA who is a full-time employee elsewhere.
- Letting an auditor's relative hold shares above ₹1 lakh face value without correction.
- Taking a loan or guarantee from the audit partner or giving one to them.
- Ignoring a change during the year, such as a new director related to the audit partner.
For the wider picture of audit requirements and timelines, see our statutory audit guide and ROC compliance page. To shortlist practising CAs, use ICAI CA Connect, our guide on how to choose a CA, and the directory of chartered accountant firms in Delhi.
Frequently asked questions
Who can be appointed as auditor of a company?
Only a chartered accountant, or a firm or LLP of chartered accountants where a majority of the partners practising in India are qualified. Only CA partners may sign for the firm. The person must also be free of every disqualification listed in section 141(3) of the Companies Act, 2013.
Can a company secretary or cost accountant be a statutory auditor?
No. Section 141(1) allows only chartered accountants to be appointed as company auditors. A company secretary or cost accountant may be a partner of a multi-disciplinary LLP that is appointed, but only the chartered accountant partners may act and sign the audit report.
Can a relative of a director be the auditor?
No. Section 141(3)(f) disqualifies a person whose relative is a director of the company, or is in its employment as a director or key managerial personnel. The board should ask about family ties before proposing an auditor.
Can an auditor hold shares in the client company?
The auditor cannot hold any security of or interest in the company or its group companies. A relative may hold securities of face value up to ₹1 lakh under Rule 10; above that the auditor must take corrective action within 60 days or face disqualification.
What is section 141 of the Companies Act?
Section 141 of the Companies Act, 2013 deals with eligibility, qualifications and disqualifications of auditors. It says who may be appointed, bars nine classes of persons, and requires an auditor who becomes disqualified after appointment to vacate office, creating a casual vacancy.
Can a firm that does our bookkeeping also do our statutory audit?
Generally no. Section 144 bars the auditor from providing accounting and bookkeeping and certain other services to the company, and section 141(3)(i) disqualifies an auditor whose related entity provides them on the appointment date. Keep the bookkeeping and the statutory audit with separate firms.
Is a CA convicted of fraud disqualified forever?
Section 141(3)(h) disqualifies a person convicted by a court of an offence involving fraud for a period of ten years from the date of conviction. After that period, the bar under this clause ends, though ICAI disciplinary consequences may be separate.
Where can I find practising chartered accountants in Delhi?
ICAI's CA Connect portal lets you search practising members and firms by city. Our directory of chartered accountant firms in Delhi lists firms near Netaji Subhash Place for non-audit work. Statutory audit must be carried out and signed by a practising chartered accountant.