Section 141(3)(g) companies act 2013 read with companies (au

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Querist : Anonymous

Querist : Anonymous (Querist)

06 May 2014 According to section 141(3)(g) Companies Act 2013 read with Companies (Audit and Auditors) Rules, 2014 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 shall not be eligible for appointment as an auditor of a company.

In the provision neither private company nor small companies are excluded from the limit of 20. Therefore a chartered Accountant or a firm of chartered Accountant only accept audit of those companies which can pay high audit fees. In that case small companies & private companies may not be able to appoint a Auditor. In such event whether small companies & private companies will be allowed to file Balance sheet & Statement of profit & loss without Audit Report.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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23 July 2025 Section 141(3)(g) of the Companies Act, 2013 & its Implications
As per Section 141(3)(g) of the Companies Act, 2013, a person or a partner of a firm shall not be eligible for appointment as an auditor of a company if, at the date of such appointment or reappointment, the person or firm is already holding the appointment as auditor of more than 20 companies. This limit includes both private companies and small companies.

Key Points:
No Exclusion for Small/Private Companies: The provision does not specifically exclude private companies or small companies from the limit of 20 companies. Therefore, a person or a firm that has already been appointed as the auditor of 20 companies, regardless of whether they are public, private, or small, cannot take up the audit of additional companies.

Potential Impact on Small Companies and Private Companies:

If a chartered accountant (CA) or audit firm has already been appointed as the auditor of 20 companies (inclusive of both public and private), it could limit their ability to accept new audit appointments, particularly for small companies or private companies.

Small companies and private companies, being relatively less lucrative in terms of audit fees, might find it difficult to appoint auditors who are already overburdened with audit assignments.

What happens in case of non-appointment of auditors?
In the event that a small company or private company is unable to appoint an auditor (because of the auditor limit), there are some important considerations:

Legal Requirements for Filing:

According to the Companies Act, 2013, companies, whether public or private, are required to get their financial statements (Balance Sheet and Profit & Loss Statement) audited.

If a company fails to appoint an auditor within the stipulated period, it cannot legally file its financial statements without an audit report. The audit report is a mandatory component of the financial statements that must be filed with the Registrar of Companies (RoC).

If the company fails to appoint an auditor, the Board of Directors is obligated to ensure the appointment of an auditor, or they can take the matter to the Central Government for assistance in appointing an auditor.

Non-compliance and Penalties:

In case a company fails to appoint an auditor, it may face penalties under the Companies Act.

The Board of Directors could face penalties for failing to comply with the statutory requirement of appointing an auditor, and the company could face non-compliance issues related to filing its financials with the Registrar of Companies.

Possible Solutions or Alternatives:
In light of the limitation created by Section 141(3)(g), small and private companies may face challenges in securing auditors. Some of the possible solutions could be:

Appointment by the Government:

In exceptional cases, the Central Government has the authority to appoint an auditor for the company if the company fails to appoint an auditor.

Relaxation for Small Companies:

As of now, the law does not provide specific relaxation for small or private companies concerning the 20-company limit. However, companies can try to appoint auditors who do not yet reach the 20-company limit or seek auditors who have fewer clients.

Consideration of Audit Fees:

While it's true that small companies may not have high-paying audit fees, small audit firms or individual auditors may still accept audits for such companies if they can offer a competitive or affordable fee structure.

Conclusion:
Small and private companies cannot file their balance sheets or profit & loss statements without an auditor’s report.

If the auditor limit of 20 companies is reached, the company’s board must take appropriate steps, including approaching the Central Government for assistance in appointing an auditor.

It is essential for small and private companies to plan ahead and identify auditors who have capacity to take on new audits within the statutory limit.

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