Who can be appointed as statutory auditor to a company?

Auditors play an important role in a company for the stakeholders. They play a vital role in auditing the accounts of the company and reporting to the stakeholders about the things carried out by the company. The article discusses the role and dealings of Auditors of the Company.

Services to be rendered by the Statutory Auditor

• Statutory Audit shall be conducted by the auditor laid under the Section 143.
• All matters shall be specified by the auditor as detailed in Section 143 and rule 11.
• In case of frauds, the Auditor shall report in the manner laid under Rule 13.
• Under Section 146 the Auditor himself or through his authorized representative shall be qualified to be an Auditor to all general meetings. He shall have the right to be heard on any part of business that concerns him. (However, the Auditor can be excused by the Company to comply with this provision)

Conditions and Eligibility Criteria for Appointment of Auditors

A certificate needs to be submitted by the auditor appointed by the Members or by the Board stating that:-

• The auditor is eligible under the Companies Act, 2013 the chartered Accountants Act, 1949 and the rules and regulations made there under.
• The above appointment is made as the terms provided under the Act.
• The Section 141 and rule 10 entails the eligibility criteria for Auditors. While section 144 lists the services that cannot be rendered by them directly or indirectly while serving as Auditor.
• The appointment is made under the limits specified under the Act.
• The list of proceedings against the Auditor or Audit firm or any partner of the Audit firm pending with respect to professional matters of conduct as disclosed in the certificate is true and correct.

Services not to be rendered in the capacity as Statutory Auditor

The following services shall not be rendered by the Auditor directly or indirectly to the Company, or its Holding or Subsidiary Company:-

• Accounting and Book keeping service
• Internal Audit
• Design and Development of any financial information system
• Actuarial Services
• Investment advisory services
• Investment Banking Services
• Rendering of outsourced financial services
• Management Services

Any other services as may be prescribed by the Government.

Person disqualified for the appointment of Auditor

A person or entities are disqualified from being appointed as the auditor of the company is as follows:-

• Body corporate other than (LLP) Limited Liability Partnership.
• Officer or employee of the company.
• Person who is partner or who is under the employment of the company.
• Person who or his relative or partner:
  1. Is holding any security of or interest in the company or its subsidiary or of its associate company or a subsidiary of such holding company. Provided that the relative may hold security or interest in the company of the face value not exceeding thousand rupees or such sum.
  2. Is indebted to the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company, in excess of such amount.
  3. Has given a guarantee or provided any security in connection with the indebtness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, for such amount.

• Person or a firm, who is directly or indirectly, has business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company of such nature.
• Person whose relative is a director or in the employment f the company as a director or a key managerial position.
• Person who is full time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding appointment as a auditor of more that twenty companies.
• Person who has been convicted by a court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction.
• Person whose subsidiary or associate company or any other form of entity, is engaged as on the date of appointment in consulting and specialised service as provided in Section 144.