Disqualification of auditor

This query is : Resolved

Ramesh Singh (R.R@j.) (Querist)
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01 October 2016 Query: Mr. A, is a director of a newly incorporated Company and i.e. ABC Pvt Ltd. Which has been incorporated on 30th September, 2016?
Mr. D is Brother of Mr. A, and a practicing Chartered Accountant.
ABC Private Limited Approaches to Mr. D and ask him to convey his consent to be appointed as First Auditor of ABC Pvt. Ltd.

1. Is Mr. D eligible to be appointed as First Auditor of ABC Pvt. Ltd. ?
2. If Mr. A will Resign from Directorship w.e.f. 5th Oct, 2016 and thereafter can they appoint Mr. D as First Auditor let say from 20th October, 2016 ?

Please give reference if there is any guideline issued by ICAI in this regard.

Thanks in Anticipation :)

CA Amrita Chattopadhyay

CA Amrita Chattopadhyay

(Expert)
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03 October 2016 As per Section 141 of Companies Act 2013 regarding eligibility, qualification and disqualification of auditors, it is stated that a person cannot be appointed as auditor whose relative is a director or is in the employment of company as a director or key managerial personnel. However, as per S.2(77) where the definition of relative states that two person is related as may be prescribed.

Thus as per my opinion brother shall be considered as relative and disqualified for director.

Ramesh Singh (R.R@j.)

Ramesh Singh (R.R@j.) (Querist)
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03 October 2016 Thank you Ma'am. the first query is resolved. what about the situation no. 2 ?

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CA Amrita Chattopadhyay

CA Amrita Chattopadhyay

(Expert)
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03 October 2016 Even though the person resigns as director, he cannot be Key Managerial personnel as well. You can refer to S.2 (51) of the Companies Act, 2013. Such other person as may be prescribed keeps the scope of KMP open. He cannot be any decision making position for the company.