Disqualifications of Auditors – Specific Cases [Section 141(3)(f)–(i)]
## Disqualifications of Auditors – Specific Cases [Section 141(3)(f)–(i)]
Certain categories of persons are disqualified from acting as auditor of a company under Section 141(3). The following four categories demand close attention:
### (f) Relative as Director / KMP
A person is disqualified if their relative is a director or is in employment of the company as a director or Key Managerial Person (KMP).
### (g) Holding Too Many Audit Appointments
A person who is in full-time employment elsewhere, or a person/partner of a firm holding appointment as auditor of a company, is disqualified if at the date of appointment or reappointment such person or partner holds audit appointments in more than 20 companies.
Excluded from the count of 20:
Type of Company
Excluded?
One Person Company (OPC)
Yes
Small Company
Yes
Dormant Company
Yes
Private company with paid-up share capital < ₹100 crores
Yes
### (h) Conviction for Fraud
A person who has been convicted by a court of an offence involving fraud, and a period of 10 years has not elapsed from the date of such conviction.
### (i) Rendering Prohibited Services
A person who directly or indirectly renders any service referred to in Section 144 to the company, or its holding or subsidiary company.
If a person appointed as auditor incurs any disqualification under Section 141(3) after his appointment, he shall:
Vacate the office as auditor immediately.
Such vacation is treated as a casual vacancy in the office of the auditor.
Worked example
### Example 1
Example (g): A partner of ABC & Co. is already the signing partner in 19 audit assignments including 3 OPCs and 2 small companies. He is now proposed to be appointed auditor of a listed company. Is there a disqualification?
Analysis: Exclude the 3 OPCs and 2 small companies from the count → effective count = 14 companies. Adding the new listed company = 15. This is within the limit of 20. No disqualification.
### Example 2
Example (h): An auditor was convicted of a fraud offence in 2018. Can he be appointed as auditor in 2026?
Analysis: 8 years have elapsed since 2018. The 10-year bar has not expired. Disqualified.
### Example 3
Example – Post-Appointment Disqualification: An auditor is appointed in June. In August, his brother is appointed as CFO (KMP) of the same company. What happens?
Analysis: The auditor now falls under disqualification (f). He must vacate the office, creating a casual vacancy to be filled as per Section 139(8).
⚠️ Common exam mistakes
Students forget that OPCs, small companies, dormant companies, and private companies with paid-up capital < ₹100 crores are excluded from the 20-company count under (g) — they count only qualifying companies.
Confusing 'relative as director' [disqualification (f)] with the auditor himself being a director — it is the relative that triggers this bar.
Missing that the 10-year clock in (h) runs from the date of conviction, not the date the offence was committed.
Forgetting that post-appointment disqualification creates a casual vacancy — not just a resignation.
Bare-Act text Section 141(3)(f)–(i) · Companies Act, 2013 · click to expand
A person shall not be eligible for appointment as an auditor of a company if— (f) a person whose relative is a director or is in the employment of the company as a director or key managerial personnel; (g) a person who is in 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 auditor of more than twenty companies other than one person companies, small companies, dormant companies and private companies having paid-up share capital less than one hundred crore rupees; (h) a 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; (i) a person who, directly or indirectly, renders any service referred to in section 144 to the company or its holding company or subsidiary company.