Qualification of an Auditor| Qualification needed to become an auditor?
The Act specifies the qualifications and eligibility criteria for individuals and firms seeking to act as auditors for companies in India. Here are the key provisions of the Companies Act, 2013, with regard to the qualification of auditors:
Professional Qualifications:
To qualify as an auditor under the Companies Act, 2013, an individual or firm must hold a valid professional qualification recognized by the Institute of Chartered Accountants of India (ICAI). Chartered Accountants (CAs) are the primary professionals who serve as auditors.
Independence and Integrity:
The Act places a strong emphasis on auditor independence and integrity. Auditors must adhere to strict ethical standards, maintain independence from the company being audited, and avoid conflicts of interest. They must also avoid any financial or familial relationships that could compromise their objectivity.
Experience and Expertise:
While the Act does not specify a minimum number of years of experience, practical experience and expertise in accounting, auditing, and taxation are essential for auditors. The Act also allows for qualified firms to be appointed as auditors.
Rotation of Auditors:
The Companies Act, 2013, introduced the concept of mandatory rotation of auditors for certain classes of companies. Under the Act, auditors for listed companies and certain other classes of companies are required to rotate after a specific term, generally a maximum of two terms of five years each for individual auditors and two terms of ten years each for audit firms. This measure is intended to enhance independence and bring fresh perspectives to the audit process.
Audit Firms:
Audit firms are recognized as eligible auditors under the Act. The Act specifies the criteria for the appointment and rotation of audit firms. The audit firm must have a minimum number of partners or qualified chartered accountants to be eligible.
Continuing Professional Education:
Auditors are expected to engage in continuing professional education to keep up-to-date with changes in accounting and auditing standards. The ICAI and other professional accounting bodies provide guidance and opportunities for professional development.
Registration and Approval:
Auditors are required to register with the National Financial Reporting Authority (NFRA) or other regulatory bodies as specified under the Act. Approval and registration are necessary to establish compliance with the qualification and eligibility criteria.
No Disqualifications:
Auditors should not be disqualified under any of the provisions of the Companies Act, 2013, or other applicable laws. Disqualifications may arise from reasons such as criminal convictions, insolvency, or regulatory violations.
Reporting to the Central Government:
The auditor is obligated to report any suspected fraud or misconduct by the company or its officers to the Central Government.
