No. President’s-Sctt/Companies Act,
2013/CLCGC/13N/April 2013 dated 15th April, 2014.
Shri Sachin Pilot,
Hon’ble Minister
of State (I/C) for Corporate Affairs,
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 —
“(a)……..
(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 143(3)(g) not to apply
to private limited companies, small companies and one person companies.
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