# Eligibility, Qualifications and Disqualifications of Auditors

Section 141 of the Companies Act, 2013 lays down who can be appointed as an auditor of a company and who cannot.

## 1. Eligibility for Appointment as Auditor

### A. Individual

A person shall be eligible for appointment as an auditor of a company only if he is a Chartered Accountant in practice.

### B. Firm (including LLP)

A firm — whether a partnership firm or an LLP — is eligible if majority of its partners practising in India are Chartered Accountants in practice.

## 2. Who Signs on Behalf of the Firm?

Where a firm (including an LLP) is appointed as auditor:

Only the partners who are Chartered Accountants in practice are authorised to act and sign on behalf of the firm.

## 3. Disqualifications — Section 141(3)

The following persons shall NOT be eligible for appointment as auditor of a company:

### (a) Body Corporate

A body corporate is disqualified, EXCEPT a Limited Liability Partnership (LLP) registered under the LLP Act, 2008.

Type	Eligible as Auditor?
Individual (CA in practice)	✓ Yes
Partnership Firm (majority CA partners)	✓ Yes
LLP (majority CA partners)	✓ Yes
Company / other Body Corporate	✗ No

### Note on Other Disqualifications (Section 141(3))

The complete list under Section 141(3) also includes (continued in further pages of the chapter):

(b) Officer or employee of the company
(c) A person who is a partner or in employment of an officer/employee of the company
(d) A person or his relative/partner holding security/interest in the company or having indebtedness/guarantee beyond prescribed limits
(e) Persons whose relatives are directors / key managerial personnel
(f) Persons in full-time employment elsewhere or those auditing more than 20 companies
(g) Convicted of fraud (within last 10 years)
(h) Persons providing prohibited services under Section 144

## Key Takeaway

The auditor must be independent and professionally competent. The law deliberately restricts the auditor's office to CAs in practice (individual / firm / LLP) and disqualifies anyone whose objectivity could be compromised by financial, employment or familial ties with the company.

Worked example

### Example 1

Example 1 — Individual Eligibility:

Mr. A is a Chartered Accountant but works as a full-time finance manager at a private company (not in practice). Mr. B is a CA in practice with a Certificate of Practice (COP).

Outcome: Only Mr. B is eligible to be appointed as auditor. Mr. A is not in practice and therefore not eligible.

### Example 2

Example 2 — Firm Composition:

M/s. XYZ & Co. is a firm with 5 partners — 3 are CAs in practice, 2 are Cost Accountants.

Outcome: The firm is eligible for appointment as auditor (majority — 3 out of 5 — are CAs in practice). However, only the 3 CA partners can sign the audit report on behalf of the firm.

### Example 3

Example 3 — LLP as Auditor:

M/s. PQR LLP is a Limited Liability Partnership registered under the LLP Act, 2008, with majority CA partners.

Outcome: Eligible for appointment as auditor. Although an LLP is technically a body corporate, Section 141(3)(a) carves out a specific exception for LLPs.

### Example 4

Example 4 — Body Corporate (Company) as Auditor:

ABC Pvt. Ltd., a company providing accountancy services, is proposed to be appointed as auditor of XYZ Ltd.

Outcome: NOT eligible — a body corporate (other than LLP) cannot be appointed as auditor of a company.

⚠️ Common exam mistakes

Forgetting that the CA must be 'in practice' — merely holding the CA qualification is not enough; a Certificate of Practice is required.
Treating LLPs as disqualified body corporates — LLPs are specifically permitted as auditors despite being bodies corporate.
Allowing non-CA partners of a firm to sign the audit report — only CA partners in practice may act and sign on behalf of the firm.
Confusing 'majority of partners' (numerical majority required) with 'all partners' (not required).
Overlooking the test of independence: even an individual CA in practice may be disqualified under other clauses of Section 141(3) if he holds securities, has indebtedness, or has business/family ties with the company.
Forgetting that disqualifications continue to apply post-appointment — if an auditor incurs a disqualification after appointment, he is deemed to have vacated office under Section 141(4).

Bare-Act text Section 141(1), (2) and (3)(a) · The Companies Act, 2013 · click to expand

Section 141(1): A person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant: Provided that a firm whereof majority of partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a company. Section 141(2): Where a firm including a limited liability partnership is appointed as an auditor of a company, only the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm. Section 141(3): The following persons shall not be eligible for appointment as an auditor of a company, namely:— (a) a body corporate other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008; (b) an officer or employee of the company; (c) a person who is a partner, or who is in the employment, of an officer or employee of the company...

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Eligibility, Qualifications and Disqualifications of Auditors (Section 141)

Worked example

⚠️ Common exam mistakes