Audits held in Private Companies irrespective of paid up capital,WILL NOT be counted for determining whether the proposed auditor is exceeding the ceiling on the number of company audits held. Ref;- Section 224(1B) as amended by Companies(Amendment)Act,2000.
Companies (Amendment) Act, 2000 has amended section 224(1B) by adding a proviso that provisions shall not apply to a private company on and after the commencement of the companies (Amendment) Act, i.e. 13.12.2000. Therefore, with this amendment, while computing the ceiling a number of audits, only audit of public companies would be taken into consideration. In other words, an auditor can accept audit of any number of private companies. This, however, is subject to guidelines of the Institute which provide restriction in respect of private companies as well. The Notification reproduced below: No.1-CA(7)/53/2001: In exercise of the powers conferred by clause (ii) of Part II of the Second Schedule to the Chartered Accountants Act, 1949, the Council of the Institute of Chartered Accountants of India hereby specifies that a member of the Institute in practice shall be deemed to be guilty of professional misconduct, if he holds at any time appointment of more than the “specified number of audit assignments of the companies under Section 224 and /or Section 228 of the Companies Act, 1956. Provided that in the case of a firm of chartered accountants in practice, the specified number of audit assignments shall be construed as the specified number of audit assignments for every partner of the firm. Provided further that where any partner of the firm of chartered accountants in practice is also a partner of any other firm or firms of chartered accountants in practice, the number of audit assignments which may be taken for all the firms together in relation to such partner shall not exceed the specified number of audit assignments in the aggregate. Provided further that where any partner of a firm or firms of chartered accountants in practice accepts one or more audit assignments in his individual capacity, or in the name of his proprietary firm, the total number of such assignment which may be accepted by all firms in relation to such chartered accountant and by him shall not exceed the specified number of audit assignments in the aggregate. Explanation: 1. for the above purpose, the specified number of audit assignments means- (a) in the case of a chartered accountant in practice or a proprietary firm of chartered accountant, thirty audit assignments whether in respect of private companies or other companies. (b) in the case of a firm of chartered accountants in practice, thirty audit assignments per partner in the firm, whether in respect of private companies or other companies. Provided that out of such specified number of audit assignments, the number of audit assignments of public companies each of which has a paid-up share capital of rupees twenty-five lakhs or more, shall not exceed ten. 2. In computing the specified number of audit assignments. (a) the number of such assignments, which he or any partner of his firm has accepted whether singly or in combination with any other chartered accountant in practice or firm of such chartered accountants, shall be taken into account. (b) the audit of the head office and branch offices of a company by one chartered accountant or firm of such chartered accountants in practice shall be regarded as one audit assignment. (c) the audit of one or more branches of the same company by one chartered accountant in practice or by firm of chartered accountants in practice in which he is a partner shall be construed as one audit assignment only. (d) the number of partners of a firm on the date of acceptance of audit assignment shall be taken into account. (e) a chartered accountant in full time employment elsewhere shall not be taken into account. 3. this notification shall come into force from the date of its publication in the Official Gazette. 4. A chartered accountant in practice as well as firm of chartered accountants in practice shall maintain a record of the audit assignments accepted by him or by the firm of chartered accountants, or by any of the partner of the firm in his individual name or as a partner of any other firm as far as possible, in the prescribed manner.
SO, NOTE THAT WHILE THE LAW EXCLUDED PRIVATE COMPANIES FROM THE SPECIFIED LIMITS BUT THE INSTITUTE HAS ISSUED THE ABOVE NOTIFICATION RESTRICTING THE OVERALL LIMIT TO 30 COMPANY AUDITS INCLUDING PRIVATE LIMITED COMPANIES. IT MAY BE NOTED THAT A MEMBER WHO FAILS TO COMPLY WITH THE NOTIFICATION SHALL BE LIABLE FOR PROFESSIONAL MISCONDUCT