Section 141 of CA 2013 : Section 141: Eligibility, Qualifications And Disqualifications Of Auditors

Explanation using Example

Imagine ABC Pvt. Ltd. is looking to appoint a new auditor. They consider appointing XYZ & Associates, a partnership firm of chartered accountants. As per Section 141(1), XYZ & Associates can be appointed as the company's auditor because the majority of its partners are qualified chartered accountants practicing in India. However, only those partners who are chartered accountants will be authorized to act and sign on behalf of the firm, according to Section 141(2).

During the vetting process, it is discovered that one of the partners in XYZ & Associates holds shares in ABC Pvt. Ltd. worth more than the prescribed limit. This partner would be ineligible to be appointed as an auditor for ABC Pvt. Ltd. under Section 141(3)(d)(i) because holding shares above a certain value creates a conflict of interest.

Furthermore, it is also found that another partner in the firm has a relative who is a director at ABC Pvt. Ltd. This situation falls under the disqualification criteria in Section 141(3)(f), thereby rendering the partner ineligible for the auditor role.

If XYZ & Associates were appointed and later one of the partners becomes indebted to the company beyond the prescribed limit, as per Section 141(3)(d)(ii), that partner would have to vacate the office, creating a casual vacancy as stated in Section 141(4).