Who can be appointed as Statutory Auditor? – A person chosen to confirm the accuracy of the company’s accounting records is known as a statutory auditor. According to the Companies Act of 2013, only a practicing Chartered Accountant (CA) is qualified to serve as a company’s statutory auditor. If a person does not meet the requirements to function in the capacity of an auditor, they cannot be appointed as a company’s statutory auditor. Additionally, a company’s auditor may be a firm of chartered accountants. Only when the bulk of the partners is active Chartered Accountants in India is such a position open to consideration. Additionally, the partners should be competent for the position in each of their distinct abilities.
A Chartered Accountant business can also act as the auditor for a company. Such an appointment is only possible if the majority of the partners are Indian Chartered Accountants. Furthermore, the partners must be qualified for appointments in their respective roles. A limited liability partnership (LLP) can also be recognized as a company’s auditor in its own right. All partners in the LLP must be full-time CPAs in order to be appointed.
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 the 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 the 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 or works for the company as a director or senior managerial employee.
- A person working full-time elsewhere, or a person or a partner of a firm holding an appointment as its auditor, if such person or partner is also an auditor for 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 perform services that have been authorised by the firm’s Board of Directors or audit committee. However, an auditor for a corporation, its holding company, or a subsidiary firm cannot provide 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