Internal Audit

Company Audit Ceiling Limit Under the Companies Act, 2013

The companies must be registered under the Companies Act 2013^[1] and abide by the Act’s provisions. The Act has prescribed legal compliance, which the incorporated company needs to fulfil. This compliance depends on the threshold limits. If the company falls under these limits prescribed by the Act 2013 of that particular provision, then the company must follow that provision. We will discuss in this article Company Audit Ceiling Limit Under the Companies Act, 2013.

What is a Company Audit?

Audit means thoroughly examining or verifying various books of accounts by an auditor. An audit also includes physical inventory checking to ensure that all the departments are updated with the documented system of recording transactions. The purpose is to ascertain the accuracy of financial statements provided by the organisation.

The audit is mandatory irrespective of any status, business structure, legal forms, or business size and is conducted to express an opinion.

Appointed an Auditor for a Company

A chartered Accountant who holds a certificate of practice under the Chartered Accountants Act 1949 becomes an auditor of the company. And also a firm appointed as an auditor by the company. However, most partners are practising in India and are eligible for the appointment of an auditor.

 Furthermore, certified chartered accountants can sign certificates or report on behalf of such a firm as an auditor.

Company Audit ceiling limit

The company audit ceiling limit or restriction on the number of audits an auditor can conduct is given under Section 141(3) (g) of the Companies Act 2013.

A person with full-time employment somewhere else or a partner of a firm holding or appointment as an auditor. At the date or time of such appointment, if a person holding an appointment as an auditor is more than 20 companies, then such person is not eligible for reappointment or appointment as an auditor of the company. It means an auditor only accepts audits of up to 20 companies.

However, the Ministry of Corporate Affairs exempted the One Person Company and the Dormant Company from the ceiling limit. Also, Private Limited Companies with less than 100 crores paid up share capital and small companies are excluded from this limit.

Conclusion

Hence, the ceiling limit for company audit only includes Public Limited Companies and Private Limited Companies with more than 100 crores of share capital. However, as per section 44AB of the Income Tax Act,1961 is prescribed to maintain the quality of tax audits to be conducted by CAs; ICAI prescribed that the total amount of audits an auditor can undertake is 60 per year.

Also Read: Stock Audit: Objective, Importance, and Best Procedure