Core concepts
- 01Auditor of company appointed by shareholders in AGM for 5 years (Sec 139).
- 02Eligibility (Sec 141): CA in practice; firm with majority CA partners; specific disqualifications.
- 03Removal before term (Sec 140): SR + CG approval; auditor entitled to be heard.
- 04Rotation: Listed/large public co — individual auditor 5 yrs (one term), firm 10 yrs (two terms); cooling 5 yrs.
- 05CARO 2020 — Companies (Auditor's Report) Order — applies to most companies barring specified exemptions.
Flowchart summary
Company Audit Timeline | Sec 139 -- Appointment (1st auditor by Board within 30 days; thereafter AGM) | Sec 140 -- Resignation / Removal | Sec 141 -- Eligibility | Sec 142 -- Remuneration | Sec 143 -- Powers, Duties, Reporting (incl. fraud)
Exam-critical pointers
- ⭐CARO 2020 has 21 clauses including loans, deposits, PPE, working capital, related parties, statutory dues.
- ⭐Auditor not liable as expert if relied in good faith — but Sec 147 imposes hefty penalty for fraud.
- ⭐Sec 143(3)(i) — IFC reporting mandatory; private cos with turnover < ₹1 cr & borrowings < ₹1 cr exempt.
- ⭐NFRA — National Financial Reporting Authority — oversight for listed and specified entities.
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