As per Section 226 (3) (d) of the Companies Act, 1956 'a person who is indebted to the Company for an amount exceeding one thousand rupees, or who has given any gurantee or provided any security in connection with the indebtedness of any third person to the company for any amount exceeding one thousand rupees shall not be qualified for appointment as auditoir of a company'.
By virtue of the aforesaid provision it is clear that if a person who is indebted to the Company for an amount exceeding Rs.1,000/- he/ she shall not be qualified to act as an Auditor of the concerned company.
In my opinion, the intention of the legislature at the time of adding the disqualifications of the auditors seems to keep the interested auditors away from the giving their view on the financial performance (accounts) of the Company. That's why they had putted a limit of an amount exceeding sum of Rs. 1000/-.
In your case, as Mr. Y has owned sum of Rs. 10,000/-, which is outstanding as on 31st March. Therefore, in my opinion, the liablity of Mr. Y towards the company made him and the entire firm disqualifed to act as an auditor of the concerned company. Further, it is immaterial whether he/ she had signed the Auditor's Report or not.
I hope you would find the above in order.