By CA Pankaj Singh
Background
The ceiling on the number of statutory audits by Chartered Accountants (CAs) in practice has been an important regulatory safeguard for decades. This restriction is designed to ensure audit quality, prevent over-concentration of audit work in the hands of a few practitioners, and align with the provisions of the Companies Act.
Historically, the statutory ceiling was governed by the Companies Act, 1956, and clarified by the ICAI Guidance Note (2008). With the enactment of the Companies Act, 2013, the framework was revised and is monitored jointly by the Ministry of Corporate Affairs (MCA) and the Institute of Chartered Accountants of India (ICAI).
1. Position under the Companies Act, 1956
As per Section 224(1B) of the Companies Act, 1956, introduced through the Companies (Amendment) Act, 2000:
- A Chartered Accountant in practice was not permitted to hold office as auditor in more than 30 companies at a time.
- Out of these 30 audits, not more than 10 audits could be of companies having a paid-up share capital of ₹25 lakhs or more.
- The ICAI Guidance Note on Audit Ceiling (2008 edition) explained the computation of this limit.
This limit applied universally, with no exclusions for small, private, or one-person companies.
2. Transition under Companies Act, 2013
With the enactment of the Companies Act, 2013, the audit ceiling framework was revised significantly.
Section 141(3)(g) of the Companies Act, 2013 states:
“A person shall not be eligible for appointment as auditor of a company if such person, or his relative or partner, is at the date of such appointment or reappointment holding appointment as auditor of more than 20 companies.”
Key change:
- The ceiling was reduced from 30 to 20 company audits.
- No sub-limit (like the earlier ₹25 lakh capital condition) exists under the 2013 Act.
3. Exclusions under Companies Act, 2013
The Ministry of Corporate Affairs (MCA), through its Notification dated 5th June 2015, clarified that the following companies are excluded from the ceiling of 20 audits:
- One Person Companies (OPCs)
- Small Companies (as defined under Section 2(85) of the Companies Act, 2013)
- Private Companies with paid-up share capital of less than ₹100 crores
This means not every audit engagement is counted toward the ceiling, significantly relaxing compliance for firms auditing small and mid-sized private entities.
For a detailed practitioner view, see TaxGuru analysis on Audit Ceiling.
4. Current Position (as of 2024–25)
The present framework can be summarized as follows:
- A Chartered Accountant (individually or as partner of a firm) can conduct audits for a maximum of 20 companies.
- Exclusions: Audits of OPCs, Small Companies, and Private Companies with paid-up share capital below ₹100 crores do not count toward this ceiling.
- Effectively, only public companies and large private companies (≥ ₹100 crores) are counted toward the limit of 20.
This interpretation is consistently supported by MCA and ICAI clarifications.
5. Practical Implications
Example 1
A CA Firm has the following audit assignments:
- 8 Public Companies (varied capital)
- 12 Private Companies (< ₹100 crores)
- 5 Small Companies
Computation:
- Public Companies = 8 (counted)
- Private Companies (< ₹100 cr) = 0 (excluded)
- Small Companies = 0 (excluded)
Total counted audits = 8 → Within statutory limit of 20
Example 2
A CA Firm has:
- 15 Public Companies
- 10 Private Companies (≥ ₹100 crores capital)
- 5 Small Companies
Computation:
- Public Companies = 15 (counted)
- Private Companies ≥ ₹100 cr = 10 (counted)
- Small Companies = 0 (excluded)
Total counted audits = 25 → Exceeds statutory limit → Non-compliance
6. ICAI Guidance and QRB Observations
The Quality Review Board (QRB) of ICAI has noted several instances of miscalculation in audit ceiling computation. Common errors include:
- Wrongly excluding large private companies (≥ ₹100 crores) from the count.
- Failure to maintain proper documentation supporting the exclusion of certain audits.
Practitioner Advisory from QRB (ICAI QRB Reports):
- Audit acceptance processes must include verification of the company’s eligibility under exclusions.
- Maintain records proving compliance with Section 141(3)(g).
- Non-compliance may result in disciplinary action under the Chartered Accountants Act, 1949.
7. Comparative Table
| Basis | Companies Act, 1956 | Companies Act, 2013 | Current (2024–25) |
| Maximum audits allowed | 30 company audits | 20 company audits | 20 company audits |
| Sub-limit | 10 audits ≥ ₹25 lakhs | None | None |
| Exclusions | None | OPCs, Small Cos, Pvt Cos < ₹100 cr | Same exclusions continue |
| Applicability | Till 2013 | From 2013 onwards | In force today |
8. Advisory for Practitioners
- Maintain a live audit register: Track statutory audit engagements, classified by company type and paid-up capital.
- Evaluate eligibility before acceptance: Confirm whether the proposed company falls within the exclusion category.
- Communicate with clients: Clarify compliance before appointment or reappointment.
- Obtain compliance declarations: Firms should maintain internal documentation and auditor’s confirmation of adherence to the 20-audit ceiling.
- Stay updated: Regularly monitor MCA Circulars and ICAI Announcements as rules may evolve.
Conclusion
The statutory ceiling on company audits for Chartered Accountants has evolved from 30 audits under the Companies Act, 1956 to 20 audits under the Companies Act, 2013, with exclusions for OPCs, Small Companies, and Private Companies with capital under ₹100 crores.
As of 2024–25, the effective ceiling remains 20 statutory company audits per Chartered Accountant (in individual capacity or as a partner), excluding specified companies.
Strict compliance with Section 141(3)(g), coupled with robust documentation, is essential to avoid regulatory scrutiny and disciplinary consequences under the Chartered Accountants Act, 1949.
For deeper insights, refer to:
