• Madhvi Patidar

Section 141 & 145 Of Companies Act, 2013

Updated: Oct 7



What is Auditor?

An auditor is a person or a firm appointed by a company to execute an audit. To act as an auditor, a person should be certified by the regulatory authority of accounting and auditing or possess certain specified qualifications.


Section 141 of the Companies Act 2013

[Auditor Eligibility, Qualification, and Disqualifications]


Who can be appointed as Auditor?

A statutory auditor of a company is a person appointed to verify the correctness of the accounting records of the company. As per the Companies Act, 2013, only a practicing Chartered Accountant (CA) is eligible to be appointed as the statutory auditor in a company. A person shall not be qualified for an appointment as statutory auditor of a company unless there is eligibility on the part of the person to act in the capacity of an auditor. Also, a Chartered Accountant firm can be appointed as an auditor of a company. Such an appointment is possible exclusively when the majority of the partners are practicing Chartered Accountants in India. The partners should also be qualified for appointments in their respective individual capacities. Further, a limited liability partnership (LLP) also can be appointed as the auditor of a firm in its name. However, to qualify for appointment, all partners in the LLP should be engaged in full-time practice as CAs.



Auditor Qualifications

A person is qualified for the appointment as the auditor of the company only if he is a Chartered Accountant within the meaning of the Chartered Accountants Act 1949. Nationality is not important. A firm whereof all the partners practicing in India are qualified for the appointment as auditor, may be appointed by its firm name to be the auditor of the company. The holder of a certificate under the restricted auditor’s certificates rules 1956 shall be entitled to be appointed as an auditor.

According to Provisions of Section 141(1) of the Companies Act, 2013 “a person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant within the meaning of Chartered Accountants Act, 1949 and holds a valid Certificate of Practice. It has been further provided that the firm shall also be considered to be appointed by its firm name whereof majority of partners practicing in India are qualified for appointment as auditor of a company. According to Provisions of Section 141(2) of the Companies Act, 2013, a firm including limited liability partnerships who are chartered accountants shall be authorized to act as auditor and sign on behalf of such limited liability partnership or firm.


Disqualification of Auditors

Disqualification of Auditors [Section 141 of Company Act, 2013]

The following persons are not qualified for the appointment as auditor of a company: -

· A Body Corporate.

· An Officer or Employee of the company.

· A Partner or Employee of an Officer or Employee of the company.

· A person who, or his relative or his partner is holding any security in the company or subsidiary company or holding company or associate company or subsidiary of such holding company.

· A person who, or his relative or his partner is indebted, to more than such amount as may be prescribed (the sum prescribed is Rs. 5 lakh) to the company or subsidiary company or holding company or associate company or subsidiary of such holding company.

· A person who, or his relative, or his partner has given a guarantee or provided any security in connection with the indebt Ness of any third person, overprescribed amount (Rs. 1 lakh) the company or subsidiary company or holding company or associate company or subsidiary of such holding company.

· A person or a firm who, whether directly or indirectly, has a business relationship of such nature as may be prescribed with the company or subsidiary company or holding company or associate company or subsidiary of such holding company.

· A person whose relative is a director or is in the employment of the company as a director or key managerial personnel.

· A person who is in the employment elsewhere or a person or a partner of a firm holding an appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding appointment as auditor of more than 20 companies.

· For a person who has been convicted by a court of an offense involving fraud & a period of 10 years has not been elapsed from the date of such conviction.

Further According to Provisions of Section 141(4) of the Companies Act, 2013, where a person appointed as auditor of the company incurs any of the disqualification mentioned in Section 141(3) of the Companies Act, 2013 after his appointment, he shall vacate his office as such auditor and such vacancy shall be deemed to be a casual vacancy in the office of the auditor.

It must be noted that the aforesaid provisions apply to all types of auditors i.e., cost auditors, statutory auditors, and secretarial auditors.



Section 145 of the Companies Act 2013


[Auditor to sign audit reports and certify other documents of the company]

The person appointed as an auditor of the company shall sign the auditor’s report or sign or certify any other document of the company by the provisions of sub-section (2) of section 141, and the qualifications, observations, or comments on financial transactions or matters, which have any adverse effect on the functioning of the company mentioned in the auditor’s report shall be read before the company in general meeting and shall be open to inspection by any member of the company.

In compliance with the provisions of section 145 of The Companies Act, 2013, the person appointed as an auditor of the company shall:

  1. Sign the auditor’s report, or

  2. Sign on certifying any other document of the company by the provisions of sub-section (2) of section 141.

As per section 141(2) of The Companies Act, 2013, only the partners who are Charted Accountants (CA) shall be authorized to act and sign on behalf of a firm including a Limited Liability Partnership (LLP) appointed as an auditor of a company.