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Can-a-Chartered-Accountant-who-resigned-as-Executive-Director-be-appointed-as-Statutory-Auditor-in-the-next-general-meeting-of-the-same-company
Is it permissible for a Chartered Accountant who has resigned from the position of Executive Director in a company, to be appointed as the Statutory Auditor during the next general meeting of the same company?
Eligibility, Qualifications and Disqualifications of Auditors (Section 143 of the Companies Act, 2013)
Who cannot be appointed as an auditor?
| Category | Details |
|---|---|
| A. | A body corporate other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008 |
| B. Person being the proposed auditor is | 1) An Officer or employee of the Company for which the audit appointment is proposed 2) A Partner of an Officer or employee of the Company 3) Is in employment of an Officer or employee of the Company 4) A person or partner of a firm holding appointment in more than 20 companies as the auditor 5) 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 6) Any person whose subsidiary or associate company or any other entity is engaged in consulting or specialized services as provided in section 144 as of the date of appointment 7) In full-time employment of a person or a partner of a firm holding appointment as auditor if such person or partner is, on the date of such appointment or reappointment, holding appointment as auditor of more than 20 companies 8) Convicted of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction 9) A person whose subsidiary or associate company or other entity is engaged on the date of appointment in consulting or specialized services as per Sec 144 |
| C. Person being the proposed auditor, or their relative or partner | I. Holds security or interest in: - The Company - Holding Company - Subsidiary Company - Associate Company - Subsidiary of its holding company Not exceeding Rs. 1 lakh II. Is indebted to: Rs. 5 lakhs III. Has provided a guarantee or security in connection with the indebtedness of a third party to: Rs. 1 lakh |
| D. | A person or firm, directly or indirectly, has a business relationship with: - The Company - Holding Company - Subsidiary Company - Associate Company - Subsidiary of its holding company Business relationship excludes professional services permitted under the Companies Act or the CA Act, and transactions in the ordinary course of business at arm’s length price |
| E. | A person whose relative: - Is a director - Is in the employment of the company as a director or key managerial personnel |
Conclusion:
- After thorough analysis, only current employment or directorship is scrutinized. The law does not prohibit a former employee or director from being appointed as the Statutory Auditor of the same company.
- Therefore, a Chartered Accountant who resigned from the position of Executive Director in a company can be appointed as the Statutory Auditor during the subsequent general meeting of the same company.
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-From the desk of CS Sharath