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Saturday, May 10, 2014

Qualification and Disqualification of a Company Auditor


Qualification of a Company Auditor:
According to Section 226(1) and 226(2) of the Companies Act, the prescribed qualifications of an auditor are as follows:

A.      Qualification [sec226 (1)]:
1.       The auditor of a co. may be either, an individual or a firm
2.       In the case of an individual, he should be a Chartered Accountant within the meaning of Chartered Accountants Act 1949 i.e. he should be holding certificate of practice.
3.       In the case of firm of auditor’s all the partners of a firm shall be chartered accountants practicing in India within chartered accountants Act1949.

B.      Qualification [Sec 226(2)]: A person holding a certificate  issued by central govt. under restricted state auditors  rules prior to the  enactment of part B state laws 1951 can also be auditor of the co.
The central government in empowered to frame rules relating to granting renewals, suspension or cancellation of such certificates.


Disqualification of a Company Auditor:
According to section 226(3) of the Companies Act, the following persons shall not be appointed as auditors of a company:
1.       A body corporate. A company cannot audit any other company,
2.       An officer or employee of the company.
3.       A person who is either a partner or employee of an officer or employee of the company.
4.       A person who has taken debt from the company for amount exceeding Rs. 1,000.
5.       A person who has taken guarantee of another person who has taken a loan exceeding Rs. 1,000 from the company.
6.       A person who holds shares or debentures of the company cannot audit that company.

A person, who is disqualified for being appointed as auditor of a company, is automatically disqualified for being auditor of its holding company or its subsidiary company or any other subsidiary of holding company.