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Disqualification of Auditor

Mayank Mehta (Student) (383 Points)

06 January 2009

Section 226(3) of the company’s act 1956 specifies that a person shall be disqualified to act as an auditor if he is indebted to the company for the amount exceeding Rs. 1000/- no matter what the case in the advance was taken.

i just want to ask to u all that if the audit firm is indebted not the auditor than what??????? whether the auditor will be disqualified or not??????? what of the co.. is pvt ltd....?????

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15 Replies

(Guest)

No, in your case he is not disqualified

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Rahul Gupta (CA Final Student) (1780 Points)
Replied 06 January 2009

Hi mayank.

The person who is qualified for the post of auditor is a CA or a firm of CA.

so if the firm is indebted to the company the firm is disqualified from being appointed as an auditor. so it does not matter whether auditor is indebted or not.

It is my view. correct me if i am mistaken

Regards

Rahul Gupta

Jeet Biswas (ACMA (in Service)) (5073 Points)
Replied 06 January 2009

That is Right. As the Firm is the Auditor in this case. the Individual Indebtedness of the Partners, doesnt matter.

CA. ANKUR JAIN (CA.....) (2800 Points)
Replied 06 January 2009

hellowwww mayank,

as per sec 226(3), if it is a proprietory concern then itself auditor is disqualified and if it is a partnership concern then the firm is disqualified because partners r acting on behalf of firm ..............

therefore as per my knowledge the firm should be disqualified

correct me if m wrong anywhere

CA Chaitanya (PRACTISING CA) (4283 Points)
Replied 06 January 2009

The case you have asked refers tro collecting the fees on progressive basis.

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CA Chaitanya (PRACTISING CA) (4283 Points)
Replied 06 January 2009

The research committee of ICAI has opined that if an auditor collects his fees on progressive basis , then he isnot indebted to the company and hence not disqualified u/s 226(3)(d)

CA Chaitanya (PRACTISING CA) (4283 Points)
Replied 06 January 2009

Therefore when an auditor collects his fees in advance, he is not disqualified.

CA. ANKUR JAIN (CA.....) (2800 Points)
Replied 06 January 2009

hellow chataniya ji,

in this case mr mayank already told that firm is INDEBTED AND if firm is indebted then how it can be feessssss......

indebtness is not covered under feeesssssssssssssssssssssss

correct me if req.

Rahul Gupta (CA Final Student) (1780 Points)
Replied 06 January 2009

Hello sir chaitanya

The auditor will get appointed only when he is not indebted right.

so his fees will also be deemed to be taken in that indebtedness?

Because as far as i know, before appointment or reappointment or after appointment if the auditor or the firm are subject to any disqualification referred to in section 226 then it shall be treated as subsequent disqualification.