Before appointing or reappointing a statutory auditor, a company should confirm that the proposed auditor satisfies the eligibility requirements and is not disqualified under Section 141 of the Companies Act, 2013 and applicable rules. CorporateWalla can assist with an auditor eligibility review, disqualification checklist, independence review, appointment documentation and related compliance.
Section 141 establishes who can be appointed as a company's statutory auditor and circumstances that disqualify a person or firm from appointment.
The review should be completed before appointment and should also be revisited if circumstances change during the auditor's term.
An individual must be a Chartered Accountant to be eligible for appointment as auditor of a company.
A firm may be appointed in its firm name where the applicable statutory requirements concerning partners qualified to act as auditors are satisfied.
Eligibility is not determined by CA qualification alone. The proposed auditor must also clear the statutory disqualification and independence checks.
The following are important statutory checks, subject to the detailed wording and exceptions in the Act and Rules.
A body corporate is generally disqualified from appointment as a company auditor, subject to statutory provisions applicable to LLPs and other permitted structures. The exact legal constitution of the proposed audit practice should therefore be checked.
An officer or employee of the company cannot ordinarily be appointed as its statutory auditor. The same principle requires review of relevant relationships with the company and entities within the statutory group framework.
The proposed auditor can be disqualified where the statutory relationship with an officer or employee falls within Section 141. This should be checked rather than relying only on the auditor's direct relationship with the company.
Holding a prohibited security or interest in the company, its subsidiary, holding company or specified related entities can result in disqualification. The Act contains conditions and permitted holding provisions that must be checked against the facts.
Indebtedness to the company or specified related entities can create disqualification where the statutory threshold and conditions are met. The current statutory amount and applicable exceptions should be verified at the time of appointment.
Providing a prohibited guarantee or security in connection with indebtedness of another person to the company or specified related entities can create disqualification where the statutory conditions are met.
A direct or indirect business relationship with the company or specified related entities can disqualify the auditor where it falls within the prescribed rules. Ordinary professional services permitted by the applicable framework should not automatically be described as prohibited business relationships. The facts, nature of the transaction and applicable rules should be reviewed.
Certain interests or indebtedness involving the auditor's relative can affect eligibility subject to the statutory limits and conditions. A complete appointment checklist should therefore cover relevant relatives and not only the proposed auditor.
The proposed auditor should not have a prohibited employment relationship with the company or the persons/entities covered by Section 141.
Disqualification can extend through the statutory group structure, including specified subsidiary and holding-company relationships. The review should therefore cover:
The statutory framework contains a disqualification for a person who is in full-time employment elsewhere, subject to the applicable provisions. This should be checked as part of the appointment review.
The auditor should also consider the statutory limits on the number of company audits that may be accepted. The current ICAI Code of Ethics and Companies Act requirements should be checked separately because the applicable ceiling can depend on the nature of the companies and current professional rules.
Eligibility must also be considered alongside restrictions on non-audit services.
Section 144 restricts statutory auditors from providing specified services to the company, its holding company or subsidiary company, subject to the statutory framework.
Examples can include specified:
Important: The list and applicable exceptions should be checked against the current Act, Rules and professional requirements.
A statutory auditor must be able to perform the audit independently.
The independence review can cover:
For public-interest entities, the current ICAI Code of Ethics may impose additional independence requirements.
These should not be treated as identical.
Determines statutory eligibility and disqualification for company auditor appointment.
Contains professional and ethical requirements, including independence and other restrictions applicable to members and firms.
An appointment should satisfy both the applicable legal requirements and professional requirements.
Eligibility should be checked:
If an auditor becomes subject to a statutory disqualification after appointment, Section 141 contains consequences including vacation of office.
Professional qualification does not override statutory disqualification.
Firm appointments require review of the applicable partner and firm requirements.
Certain relative interests can affect eligibility.
The statutory framework extends to specified holding/subsidiary relationships.
Thresholds should be verified under the current law.
The exact statutory and rules-based test matters.
An auditor may be technically qualified but still face restrictions relating to non-audit services.
Companies Act compliance and ICAI ethical requirements should both be considered.
Eligibility should be reassessed when facts or law change.
These are different tests.
Eligibility/disqualification: Can this auditor legally be appointed?
Rotation: Has the auditor reached a statutory tenure limit applicable to the company?
A proposed auditor must satisfy both where rotation applies. See Auditor Rotation.
Removal concerns ending an auditor's appointment before expiry and follows a separate statutory procedure. See Auditor Removal.
Resignation is initiated by the auditor and creates a separate compliance process. See Auditor Resignation.
Auditor eligibility and disqualification review is scope-based. Fees may depend on:
The review timeline depends on the complexity of:
Pick the speed and depth that matches your need. Same quality, same CA team — only the timeline changes.
Timeline: Quoted on company structure and auditor type
Timeline: Quoted on group entities and number of partners
Timeline: Quoted on review complexity and appointment process
Every price above is a professional fee, excluding GST and government charges. 50% on delivery.
Eligibility and disqualification reviews are quoted on scope, because the work depends on the company structure, number of group entities, individual vs firm appointment, number of partners, independence issues, non-audit services, historical appointment review, rotation interaction and appointment documentation and filing. The professional fee excludes GST and government fees.
Review the company type, holding/subsidiary structure, listed/unlisted status, public-interest status where relevant and government-company status.
Review whether the auditor is an individual or firm, CA membership, firm constitution, partners, registration/firm details and relevant professional status.
Check officer/employee relationships, security interests, indebtedness, guarantees, business relationships, relative interests, group-company relationships, full-time employment and other statutory disqualifications.
Review whether the auditor or its network/firm is providing services that may be prohibited or impair independence.
Review the applicable statutory and professional limits on company audit appointments.
Maintain the eligibility confirmation, disqualification checklist, independence declaration, consent, relevant partner details and appointment records.
Where eligible, proceed with the applicable Board process, shareholder approval, appointment documentation, MCA filing and statutory records.
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Eligibility is checked beyond CA qualification alone, covering firm constitution, partners and the statutory group structure.
Section 141 matters such as security interests, indebtedness, guarantees, business relationships and relative interests are checked against the facts.
Section 144 restricted services and ICAI professional requirements are considered alongside statutory eligibility.
Where the auditor is eligible, the Board process, shareholder approval, appointment documents, MCA filing and statutory records can follow.
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