Section 141 of the Companies Act, 2013 says only a chartered accountant can audit a company, and it lists nine situations that disqualify a person or firm. The list covers relationships, shareholdings, debts, fraud convictions and workload. If a disqualification arises after appointment, the auditor must leave.
Last reviewed: 17 October 2026. Facts checked. We opened a summary of section 141 on lawx.in (which confirmed clauses (g) and (h) and sub-section (4); the 144 services list in clause (i) was checked on a bare-act page for section 144) and a Taxmann chapter on auditor qualifications, and ran a web search on the 20-company limit. The India Code page returned a 403 error, so we did not read the statute directly. Rupee limits for debts, guarantees and relatives' shares come from one commentary page and are marked as such. We did not open the Companies (Audit and Auditors) Rules, 2014.
Who is eligible
Under sections 141(1) and 141(2), as summarised on the pages we opened:
- The person must be a chartered accountant. The Taxmann chapter adds a valid certificate of practice.
- A firm can be appointed by its firm name if most of its partners practising in India are qualified.
- When a firm or LLP is appointed, only partners who are chartered accountants can act and sign.
The nine disqualifications in section 141(3)
| Clause | Who is disqualified |
|---|---|
| (a) | A body corporate, other than an LLP registered under the LLP Act, 2008 |
| (b) | An officer or employee of the company |
| (c) | A partner of, or someone employed by, an officer or employee of the company |
| (d) | A person, or their relative or partner, who holds securities or interest in the company or its group, owes it more than a prescribed amount, or has guaranteed a third party's debt to it above a prescribed amount |
| (e) | A person or firm with a prescribed business relationship with the company or its group |
| (f) | A person whose relative is a director or key managerial personnel of the company |
| (g) | A person in full-time employment elsewhere, or a person or firm already holding auditor appointments in more than twenty companies on the date of appointment or reappointment |
| (h) | A person convicted of an offence involving fraud, until ten years have passed since conviction |
| (i) | A person who directly or indirectly provides a section 144 service to the company, its holding company or its subsidiary |
The numbers behind clause (d)
The statute says "prescribed amount". One commentary we opened gives the rule figures as:
- indebtedness above ₹5 lakh, and
- guarantees or security for a third party's debt above ₹1 lakh.
The same page says a relative may hold securities with face value up to ₹1,00,000, and that this relief does not cover the auditor or partner. It also mentions a 60-day window to correct a relative's excess holding. Treat these as pointers and check the Rules before you sign off.
The 20-company limit in plain words
Clause (g) counts appointments on the date of appointment or reappointment. It says "more than twenty". Which companies count is set by the Rules. Our search results disagreed. Some said private companies are outside the count. Others referred to One Person Companies, dormant companies, small companies and private companies below a paid-up capital figure. Because they disagree, we do not give a list. Read the current Rules and count carefully.
Business relationship
The Taxmann chapter says a business relationship means a transaction for a commercial purpose. It excludes professional services permitted under the Companies Act and the Chartered Accountants Act, and arm's-length transactions in the ordinary course, such as sales by a telecom, airline, hospital or hotel company. This is commentary, so confirm against Rule 3 and the exact facts.
If you become disqualified
Under section 141(4), an auditor who incurs a disqualification after appointment vacates office. That creates a casual vacancy. The Board then fills it as section 139 describes. See Section 139: appointment, tenure and rotation.
A pre-acceptance checklist
- Confirm the CA's certificate of practice is valid.
- Ask the client for directors, key managerial personnel and group entities.
- Check the firm's own relationships with each, including relatives.
- Check shareholdings, loans and guarantees, including partners and relatives.
- Count current auditor appointments against the limit.
- Confirm no section 144 service is being given. Use the independence confirmation template.
- Run the section 141 disqualification checker and file the result.
Frequently Asked Questions
Can a company be an auditor?
No. A body corporate cannot be appointed, except an LLP registered under the LLP Act, 2008.
Can a CA who holds shares in the company audit it?
Not if the CA, a relative or a partner holds securities or interest in the company or its group, subject to the relief for relatives set in the Rules. Check the Rule.
Does a fraud conviction bar a CA for life?
The text we saw says until ten years have passed since the conviction.
Is the 20-company limit per person or per firm?
Clause (g) refers to a person or a partner of a firm. Read it together with the Rules on counting.
What if a relative becomes a director after I am appointed?
Clause (f) is a disqualification. Under 141(4) you must vacate office.
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