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Section 139 - appointment of auditor

Jasjeet (in practice) (196 Points)

12 May 2017

Query 1. Whether Proprietorship firm of a Chartered Accountant is to be considered as an individual or firm pursuant to Sec. 139(2) ??? Query 2 : Auditor was appointed for audit of 2012-13 onwards. If during the FY 2014-15 the public borrowing of the company exceeded Rs. 50 crore than pursuant to Rule 5 of Companies (Audit & Accounts) Rules, 2014 an individual can't be auditor for more than five consecutive years. Than my query is whether an auditor is covered for rotation in 2017 AGM or not ???

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7 Replies

Sudhir Todkar (CS Professional) (1021 Points)
Replied 12 May 2017

1) If company appointes him or her in individual capacity then it's an individual auditor otherwise partnership firm where majority of partners are CA Qualified.

2) Companies act 2013 has given transition period of 3 years ( from 1-4-2017 so Company has to comply this provision on or before 31-3-2017) in order to comply the term provision i.e. for individual 5 years and 10 for partnership firm. So in this case if he/she appointed on or before 1-4-2017 he will get excess of 3 years to hold office as an auditor.

Yes he is covered under retire by rotation. He can also be reappointed after expiry of cooling period of 5 years and he should not be associated with that company or its group companies. If he joins any partnership firm that firm also get disqualified to appoint as an auditor.

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Jasjeet (in practice) (196 Points)
Replied 12 May 2017

Thanks for your reply Sudhir,

1. Its not partnership firm its properitorship firm - so properitorship firm is an individual or firm ???

2. Appointed in 2012 AGM - so if its firm than firm still have time till 2022 but if properitorship firm is to be considered as individual than rotation will be applicable in 2017 AGM??

So plz clarify whether proprietorship firm is an indvidual or firm ????

Sudhir Todkar (CS Professional) (1021 Points)
Replied 12 May 2017

1- Individual only

2- Maximum tenure is 5 years since he is individual + transition period of 3 years from 1-4-2014.

Jasjeet (in practice) (196 Points)
Replied 12 May 2017

I am still not convienced that Properitorship firm of a chartered Accountant is an individual for SEc. 139 of CA 2013

Sudhir Todkar (CS Professional) (1021 Points)
Replied 12 May 2017

As per ICAI sole proprietorship is a firm only. However according to section 141 auditor can be a CA individual or Partnership firm having majority partners CA Qualified.

Partnership firm means where 2 or more partners are working to achieve commen objects of firm.

In the above case he is individual only working as SOLE PROPRIETORSHIP. If you consider him as a firm then you will violate the provision of tenure of 5 years for individual, in case you reappointed for more than 5 excluding transition period...

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Jasjeet (in practice) (196 Points)
Replied 12 May 2017

Yes right you have a point here.