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CORAA University · Free tool · 2026

Auditor disqualification checker 2026

Before you sign the consent and eligibility certificate, walk the disqualifications one by one: shares held by you, a partner or a relative, money owed, guarantees given, business dealings, relatives on the board, the twenty-company ceiling and the non-audit services you cannot render. You get eligible or disqualified, with the clause for each point — on the limits in force for appointments in 2026 and FY 2026-27.

Who is being appointed
Is the proposed auditor a chartered accountant in practice — or a firm or LLP in which the majority of partners practising in India are?
Section 141(1)
Is the proposed auditor a body corporate other than an LLP?
Section 141(3)(a)
Is the person an officer or employee of the company?
Section 141(3)(b)
Is the person a partner of, or employed by, an officer or employee of the company?
Section 141(3)(c)
Financial interests — you, your partners and your relatives
Test against the company, its subsidiary, its holding or associate company, and any subsidiary of that holding company
Do you or any partner hold any security of, or interest in, the company or those group entities?
Section 141(3)(d)(i) — no minimum amount for the auditor or a partner
Relationships
Do you or the firm have any commercial dealing with the company or its group, directly or indirectly?
Section 141(3)(e) — buying from it, selling to it, a joint venture, a lease, a referral arrangement
Is a relative a director of the company, or employed by it as a director or key managerial personnel?
Section 141(3)(f)
Are you in full-time employment elsewhere?
Section 141(3)(g)
Convicted by a court of an offence involving fraud in the last ten years?
Section 141(3)(h)
Non-audit services to the company, its holding or its subsidiary
Select any you, a partner, a relative or a network entity render — Section 144

Close to twenty company audits? Count what actually counts partner by partner — and check how long the firm can stay with the client in the auditor rotation tracker.

How auditor disqualification is tested in 2026

Section 141 of the Companies Act, 2013 does two things. Sub-section (1) says who can be an auditor at all: a chartered accountant in practice, or a firm — including an LLP — in which the majority of partners practising in India are qualified. Sub-section (3) then lists the persons who cannot be appointed even though they are qualified: a body corporate other than an LLP; an officer or employee of the company; a partner or employee of such an officer or employee; a person with a financial interest in, a debt to, or a guarantee in favour of the company or its group; a person with a business relationship with it; a person whose relative is a director or key managerial personnel; a person in full-time employment elsewhere or already at the twenty-company ceiling; a person convicted of fraud in the last ten years; and a person rendering a service barred by Section 144.

The money limits sit in Rule 10 of the Companies (Audit and Auditors) Rules, 2014. The auditor and the auditor’s partners cannot hold any security of or interest in the company, its subsidiary, its holding or associate company, or a subsidiary of that holding company — there is no small-holding allowance. A relative may hold securities of face value not exceeding ₹1 lakh. Indebtedness of the auditor, a relative or a partner to the company or those group entities disqualifies when it is in excess of ₹5 lakh, and a guarantee or security given for a third person’s indebtedness disqualifies when it is in excess of ₹1 lakh. Rule 10(4) defines a business relationship as any transaction entered into for a commercial purpose, with two exceptions: professional services an auditor is permitted to render, and transactions in the ordinary course of the company’s business at arm’s length price.

Section 144 supplies the last limb. An auditor may provide the company only such other services as the Board or the audit committee approves, and never — directly or indirectly, to the company, its holding company or its subsidiary — accounting and book-keeping services, internal audit, design and implementation of any financial information system, actuarial services, investment advisory services, investment banking services, outsourced financial services, or management services. “Indirectly” is defined widely: for a firm it covers the partners, the firm’s parent, subsidiary or associate entities, and any entity in which the firm or a partner has significant influence or control, or whose name, trade mark or brand the firm uses. Rendering any of these is itself a disqualification under Section 141(3)(i).

Worked example — a firm asked to take a new company audit for FY 2026-27

A three-partner firm is offered the statutory audit of a private company. One partner’s spouse holds shares in the company’s holding company with a face value of ₹1,40,000. Another partner has an outstanding vehicle loan of ₹3,80,000 from the company, which is a non-banking finance company. An associate entity that uses the firm’s brand maintains the books of the company’s subsidiary.

Inputs
Relative’s shareholding (face value)₹1,40,000 in the holding company
Partner’s indebtedness to the company₹3,80,000
Guarantees givenNone
Non-audit servicesBook-keeping for the subsidiary, through a network entity
Output
Relative’s shareholdingDisqualified — exceeds ₹1,00,000, Sec 141(3)(d)(i) and Rule 10(1)
IndebtednessNot attracted — not in excess of ₹5,00,000, Rule 10(2)
Book-keeping for the subsidiaryDisqualified — Sec 141(3)(i) read with Sec 144(a)
VerdictDisqualified on two clauses
The firm cannot accept until the spouse’s holding is brought down to ₹1,00,000 face value or less and the book-keeping engagement is ended. The holding counts even though it is in the holding company rather than the auditee, and the book-keeping counts even though the firm itself does not do it and it is done for the subsidiary — the brand-sharing entity is “indirectly” the firm. The loan is under the statutory limit, but it is to a partner from an audit client and still has to be considered under the ICAI Code of Ethics.

Common mistakes

Testing only the auditee and not its group
Clause (d) reaches the company, its subsidiary, its holding or associate company, and a subsidiary of that holding company. A relative’s shares in the listed parent of an unlisted audit client count.
Assuming the ₹1 lakh allowance covers the auditor
The allowance is for a relative only. The auditor and the auditor’s partners cannot hold any security or interest at all, however small.
Measuring a relative’s holding at market value
Rule 10(1) is worded on face value. One thousand shares of ₹10 each are ₹10,000 for this test whatever they trade at.
Treating a different partner as a cure
Clause (d) is attracted by the holding, debt or guarantee of the person, a relative or a partner. One partner’s position disqualifies the firm; assigning the engagement to another partner does not remove it.
Overlooking services rendered through network entities
Section 144 applies to services rendered directly or indirectly. A consulting arm, an associate entity or a firm sharing the brand that does book-keeping, internal audit or system implementation for the client, its holding or its subsidiary disqualifies the auditor.
Not re-testing after appointment
Section 141(4) requires an auditor who becomes disqualified after appointment to vacate office. A relative appointed as chief financial officer mid-term, or a new partner who brings a shareholding, changes the answer. Where a relative’s shareholding crosses the limit, Rule 10(1) gives sixty days to correct it.

Frequently asked questions

Who is disqualified from being appointed as auditor of a company in 2026?+
Nine classes of person, listed in Section 141(3), and the list is unchanged for 2026 and FY 2026-27 appointments. Under Section 141(3) of the Companies Act, 2013: a body corporate other than an LLP; an officer or employee of the company; a partner or employee of such an officer or employee; a person who, or whose relative or partner, holds securities of, is indebted to, or has given a guarantee in favour of the company or its group beyond the prescribed limits; a person with a business relationship with the company; a person whose relative is a director or key managerial personnel; a person in full-time employment elsewhere or holding more than twenty company audits; a person convicted of fraud within ten years; and a person rendering services barred by Section 144.
Can an auditor hold shares in the company being audited?+
No. The auditor and the auditor’s partners cannot hold any security of or interest in the company, its subsidiary, its holding or associate company, or a subsidiary of that holding company. Only a relative has an allowance — securities of face value not exceeding ₹1 lakh under Rule 10(1).
What happens if a relative’s shareholding crosses ₹1 lakh after appointment?+
The auditor has sixty days to correct it. The proviso to Rule 10(1) requires the auditor to take corrective action to bring the holding back within the limit within sixty days of the acquisition.
What is the indebtedness limit for an auditor in FY 2026-27?+
₹5 lakh. A person who, or whose relative or partner, is indebted to the company, its subsidiary, its holding or associate company, or a subsidiary of that holding company in excess of ₹5 lakh is not eligible for appointment — Section 141(3)(d)(ii) read with Rule 10(2).
What is the guarantee limit for an auditor in FY 2026-27?+
₹1 lakh. A guarantee given, or security provided, by the person or a relative or partner in connection with the indebtedness of any third person to the company or its group disqualifies when it is in excess of ₹1 lakh — Section 141(3)(d)(iii) read with Rule 10(3).
What counts as a business relationship under Section 141(3)(e)?+
Any transaction entered into for a commercial purpose, with two exceptions. Rule 10(4) defines it as any transaction entered into for a commercial purpose, except professional services permitted to be rendered by an auditor or audit firm under the Companies Act and the Chartered Accountants Act, 1949, and commercial transactions in the ordinary course of the company’s business at arm’s length price — such as buying the company’s goods or services on the terms available to any customer.
Which services can a statutory auditor not provide in 2026?+
Eight kinds of non-audit service. Section 144 bars accounting and book-keeping services, internal audit, design and implementation of any financial information system, actuarial services, investment advisory services, investment banking services, rendering of outsourced financial services, and management services — to the company, its holding company or its subsidiary, directly or indirectly.
Can the statutory auditor also do the tax audit?+
Yes. Section 144 does not list tax audit or tax representation among the prohibited services, so the statutory auditor can take them, subject to approval by the Board or audit committee and to the fee and independence requirements of the ICAI Code of Ethics.
How many company audits can a chartered accountant hold in 2026?+
Twenty. A person, or a partner of a firm, cannot hold appointment as auditor of more than twenty companies. One person companies, dormant companies, small companies and private companies with paid-up share capital below ₹100 crore are left out of the count.
What happens if an auditor becomes disqualified after appointment?+
The auditor must vacate office. Section 141(4) requires the auditor to vacate office, and the vacation is deemed a casual vacancy in the office of the auditor, to be filled in the manner laid down in Section 139(8).

Authoritative sources

MCA
Companies Act, 2013 — Section 141 — Eligibility, qualifications and disqualifications of auditors — sub-section (3) clauses (a) to (i), and the vacation of office in sub-section (4).
MCA
Companies (Audit and Auditors) Rules, 2014 — Rule 10 — The prescribed limits: a relative’s security holding of face value not exceeding ₹1 lakh with sixty days to correct an excess, indebtedness in excess of ₹5 lakh, guarantee or security in excess of ₹1 lakh, and the definition of “business relationship”.
MCA
Companies Act, 2013 — Section 144 — Services an auditor cannot render to the company, its holding company or its subsidiary, with the Explanation defining “directly or indirectly” for an individual and for a firm.
ICAI
ICAI — Code of Ethics — Independence requirements that apply in addition to the statutory disqualifications, including for financial interests, loans and non-assurance services.
Always confirm against the latest version of the source. Regulations evolve and amendments are common.
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Last reviewed: 2026-10-01 · For informational purposes only — not professional advice.