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CA Intermediate · Corporate and Other Laws · Audit and Auditors

Veda Textiles Ltd, an unlisted public company, has paid-up share capital of Rs 8 crore and borrowings from banks of Rs 40 crore. At its AGM, it appointed CA firm Rao & Co. as statutory auditor. Rao & Co. has two partners. Which statement reflects the correct legal position under the Companies Act, 2013 about who can be appointed as auditor?

A firm of chartered accountants can be appointed as company auditor, and only its partners who are practising chartered accountants are authorised to act and sign the report. Employees cannot sign, and the Act imposes no same-city condition on partners.

  1. AOnly an individual chartered accountant can be appointed; a firm cannot be appointed
  2. BA firm of chartered accountants can be appointed, and only partners who are chartered accountants are authorised to act as auditorCorrect
  3. CA firm can be appointed, and any employee of the firm may sign the audit report
  4. DA firm can be appointed only if all partners are practising in the same city

Explanation

The Act allows an individual or a firm (including an LLP) of chartered accountants to be appointed as auditor. Where a firm is appointed, only those partners who are chartered accountants in practice are authorised to act and sign on its behalf. Employees of the firm cannot sign, and no same-city requirement exists.

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