Representation to MCA regarding limit on number of audits as per Section 141 (3) (g) of the Companies Act 2013 – (17-04-2014)

No. President’s-Sctt/Companies Act, 2013/CLCGC/13N/April 2013

Shri Sachin Pilot

Hon’ble Minister of State (I/C) for Corporate Affair Government of India

Sashtri Bhavan, New Delhi 110001

Hon’ble Sir,

Sub: Limit on number of Audits as per Section 141(3)(g) of the Companies Act, 2013

We wish to draw your kind attention to the genuine difficulties arising out of the restriction on number of audit, which can be conducted by an auditor under section 141(3)(g) of the Companies Act, 2013. As per the said section, the following persons shall not be eligible for appointment as an auditor of company, namely —

(g)………… 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”.

Hence an auditor cannot accept audit of more than 20 companies. The aforesaid restriction also covers one person companies, small companies and private companies.

It may be pointed out that Companies Act, 1956 earlier (prior to 2000) contained similar provisions relating to cap of number of companies including audit of private companies. However, as per Companies (Amendment) Act, 2000 the restriction relating to cap on number audit of private limited companies was specifically deleted.

The new provisions in the Companies Act, 2013 extending the ceiling on number of audits to private limited companies is, therefore, contrary to the current provision of the Companies Act, 1956. Considering the increase in the number of private limited companies, we sincerely believe that the provision contained in the Companies Act, 2013 as enumerated above relating to cap of number of audits of 20 will create genuine difficulties to the corporates and the auditors. This may also lead to increase in the cost of audit for the corporates as an auditor will only be able to audit 20 companies.

The rationale for inclusion of the restriction in number of audit to private limited companies also is not well justified and was not discussed with the profession or exposed to the public.

We believe that the above restrictions are unintended, causing enormous difficulties and undue hardship to corporates and auditors.

We therefore, request the Government to invoke the powers conferred by Section 470 of the Companies Act,2013 to remove difficulties by issuing an order to make the provision of Section 141(3)(g) not to apply to private limited companies, small companies and one person companies.

With warm regards,

Yours sincerely

CA. K.Raghu,

President, ICAI

Download Official Copy of Representation.

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0 responses to “Limit on number of audits under Companies Act 2013 – ICAI Representation to MCA”

  1. ramarajan says:

    sir, simply fixing a cap on number of corporate audits as 20, is only ridiculous, because there are many dummy private companies who do not run any business and who can pay fees only to the tune of Rs.2000 to Rs.5000. If even these companies are taken in to account, then an auditor cannot earn even a lac of rupees per year! and there will not be any genuine work to be done by the auditor for these companies

  2. Manish Mittal says:

    Limitation of 20 audits is welcome… but there should be some criteria of turnover etc. otherwise audit will become very expensive task for small companies and they will be forced to close the companies or convert into LLPs.

  3. Dhiraj Kr. Singh says:

    Sir

    As far as my knowledge is concern we need to check the ratio that as on date of circular how many company is floated and and running and how many Auditor’s are available to do Audit of the Companies.

    for say if no. of Co. 100000 and no of Practicing Auditor is 5000 then we need to raise the limit to 100000/5000 = 20 else

    this decision is practically objectionable and will create Compliance problem to the company which formed as on date…… because that Company Director’s will face difficulty to Appoint Auditor or they have to pay a high Fees for appointment……. which will leads to unfair Professional Practice and against Code of Conduct of the ICAI.

    Otherwise ICAI have to prepare a systamatic action plan to qualify pass more C.A to full fill the present demand into the market…….. so that new passed out C.A can start their practice immediately……

  4. Girish Borkar says:

    Very interesting comments. By the same logic a heart specialist should tend to only x patients a month, a lawyer should not be able to take more than 20 corporate clients a year, and so on ad so forth. With more than 13 lakh private limited companies and about 150000 qualified CA’s of whom maybe 40000 or less are in practice, that leaves a huge gap of companies who will be looking for CA’s as auditors……

  5. Dheeraj says:

    good to see the worry of institute about their members & recent corporate
    issues.

  6. J S Kochar says:

    I wonder how one CA can do audits of even twenty companies,with huge responsibility cast on auditors. The cap on number of audits is wholly welcome

  7. Mukesh Singh says:

    It is very good decision of Ministry of Corporate Affairs.Small firms/newly qualifies CA could get their share. The quality of Audit will also improve, the companies Act 2013 is so vast & complicated & the fines are huge. Atleast by this CA’s could stick to the company law books to implement very good practices & advise for the good governance to their clients.

    Mukesh Singh
    FCS ACSI

  8. S S Gaur says:

    Dear Sirs ,

    In view of need to provide professional opportunity to small and medium firms ,specially to new entrants this restriction is justified . The CAP OF 20 audits is quite reasonable . How many qualitative audits can be done by single hands . The argument that private company should not be counted is also not justified .
    Let senior people handle large audits and leave private companies audits to small and medium firms .
    In fact in view of the need of quality audits , this cap needs to be brought down further .

    thanks ,

    S S Gaur

  9. Dr Arun Draviam says:

    It is ripe time for laying a cap on the number of cases a lawyer in practice can handle at a time. This will serve as an indirect pressure on lawyers to seek adjournments on silly untenable grounds. The clients will pay lesser fees. The number of penditing cases in various judicial fora will come down drstically.

  10. Waseem says:

    The last paragraph of the letter refers to Sec 143(3)(g) which should have been Sec 141(3)(g).
    Waseem

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