Qualification and disqualification of auditor
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
25 February 2015
1) sec 143(1) a person who is in full time employment elsewhere is
disqualified.
What if he is in part time employment some where??
2) sec 143(1) a person whose relative is director or key managerial
person in the Company (Example X.LTD) is disqualified..
What if the relative is KMP or CEO in the subsidary of X LTD??
Please clarify..
thank u..
disqualified.
What if he is in part time employment some where??
2) sec 143(1) a person whose relative is director or key managerial
person in the Company (Example X.LTD) is disqualified..
What if the relative is KMP or CEO in the subsidary of X LTD??
Please clarify..
thank u..
25 February 2015
1. allowed as specifically not written anything.
2.still will be disqualified.
2.still will be disqualified.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
27 February 2015
how shall answer to 2nd question is disqualified sir..
i mean there is nothing said about subsidary company in the subsection of section 143???
i mean there is nothing said about subsidary company in the subsection of section 143???
10 August 2024
Under the Companies Act, 2013, the qualification and disqualification of auditors are outlined primarily in Section 141 and Section 143. Here’s a detailed breakdown regarding the qualifications and disqualifications of auditors based on your queries:
### **1. Disqualification Based on Full-Time Employment (Section 143(1))**
**Section 143(1) of the Companies Act, 2013:**
- A person who is in full-time employment elsewhere is disqualified from being appointed as an auditor of a company.
**What if the person is in part-time employment?**
- **Full-Time vs. Part-Time Employment:**
- **Full-Time Employment:** If an individual is employed on a full-time basis, they are disqualified from acting as an auditor for any company.
- **Part-Time Employment:** If the individual is in part-time employment, they may be eligible to act as an auditor, provided they meet all other qualifications and conditions specified under the Act.
### **2. Disqualification Based on Relatives (Section 143(3))**
**Section 143(3) of the Companies Act, 2013:**
- A person is disqualified from being appointed as an auditor if their relative is a director or key managerial personnel (KMP) of the company.
**Scenario: Relative is a KMP or CEO in a Subsidiary of the Company:**
- **Direct Relationship:** The section explicitly disqualifies an auditor if a relative is a director or KMP of the company for which they are to be appointed as auditor.
- **Subsidiary Company:** The section does not explicitly mention subsidiaries, but the principles of corporate governance suggest that the disqualification can apply to subsidiaries as well. Here’s why:
- **Principle of Independence:** The intention behind such disqualifications is to maintain the independence of the auditor and avoid any conflict of interest. Even if a relative is a KMP in a subsidiary, it could potentially affect the auditor’s independence when auditing the parent company.
- **Interpretation:** While the law specifically mentions the company itself, the principles of corporate governance and practical considerations imply that if a relative is a KMP or CEO in a subsidiary, it may still affect the auditor’s independence with respect to the parent company. Therefore:
- **Disqualification Interpretation:** If the relative is a KMP or CEO in a subsidiary, the auditor may still be considered disqualified for the parent company due to potential conflict of interest or independence issues.
### **Clarification for Auditors:**
1. **Full-Time Employment:** If the auditor is employed full-time elsewhere, they are disqualified. Part-time employment does not disqualify the auditor as long as other conditions are met.
2. **Relative as KMP in Subsidiary:** Although Section 143(3) does not specifically mention subsidiaries, the principle of auditor independence suggests that if a relative is a KMP or CEO in a subsidiary, it could still disqualify the auditor from being appointed for the parent company to avoid any potential conflict of interest.
**Advice:** For definitive legal interpretations, consult legal or professional advice to ensure compliance with the nuances of the Companies Act and to maintain the highest standards of audit independence and governance.
### **1. Disqualification Based on Full-Time Employment (Section 143(1))**
**Section 143(1) of the Companies Act, 2013:**
- A person who is in full-time employment elsewhere is disqualified from being appointed as an auditor of a company.
**What if the person is in part-time employment?**
- **Full-Time vs. Part-Time Employment:**
- **Full-Time Employment:** If an individual is employed on a full-time basis, they are disqualified from acting as an auditor for any company.
- **Part-Time Employment:** If the individual is in part-time employment, they may be eligible to act as an auditor, provided they meet all other qualifications and conditions specified under the Act.
### **2. Disqualification Based on Relatives (Section 143(3))**
**Section 143(3) of the Companies Act, 2013:**
- A person is disqualified from being appointed as an auditor if their relative is a director or key managerial personnel (KMP) of the company.
**Scenario: Relative is a KMP or CEO in a Subsidiary of the Company:**
- **Direct Relationship:** The section explicitly disqualifies an auditor if a relative is a director or KMP of the company for which they are to be appointed as auditor.
- **Subsidiary Company:** The section does not explicitly mention subsidiaries, but the principles of corporate governance suggest that the disqualification can apply to subsidiaries as well. Here’s why:
- **Principle of Independence:** The intention behind such disqualifications is to maintain the independence of the auditor and avoid any conflict of interest. Even if a relative is a KMP in a subsidiary, it could potentially affect the auditor’s independence when auditing the parent company.
- **Interpretation:** While the law specifically mentions the company itself, the principles of corporate governance and practical considerations imply that if a relative is a KMP or CEO in a subsidiary, it may still affect the auditor’s independence with respect to the parent company. Therefore:
- **Disqualification Interpretation:** If the relative is a KMP or CEO in a subsidiary, the auditor may still be considered disqualified for the parent company due to potential conflict of interest or independence issues.
### **Clarification for Auditors:**
1. **Full-Time Employment:** If the auditor is employed full-time elsewhere, they are disqualified. Part-time employment does not disqualify the auditor as long as other conditions are met.
2. **Relative as KMP in Subsidiary:** Although Section 143(3) does not specifically mention subsidiaries, the principle of auditor independence suggests that if a relative is a KMP or CEO in a subsidiary, it could still disqualify the auditor from being appointed for the parent company to avoid any potential conflict of interest.
**Advice:** For definitive legal interpretations, consult legal or professional advice to ensure compliance with the nuances of the Companies Act and to maintain the highest standards of audit independence and governance.
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