Answer & Solution
Answer: Option
B
Solution:
According to Section 141(3)(g) of the Companies Act, 2013, a person or a firm shall be disqualified from being appointed as an auditor of a company if such person or firm is already auditing more than 20 companies at the date of appointment.
This provision has been included in law to ensure that auditors are not overburdened with too many audit assignments. The quality of audit work may deteriorate if an auditor takes on excessive engagements. Hence, the cap of 20 audits has been set to maintain efficiency, independence, and effectiveness of the auditing process.
Important Clarification:
- While counting the number of 20 company audits, private companies with paid-up share capital less than Rs. 100 crore are excluded.
- Thus, the limit mainly applies to audits of public companies and large private companies.
Why not other options?
- Option A: 12 → Not mentioned in law.
- Option C: 25 → Incorrect, limit is 20 not 25.
- Option D: 28 → Incorrect, no such provision.
Conclusion:
A company cannot appoint a person or a firm as its auditor if such auditor is already holding audit assignments of 20 or more companies. Therefore, the correct answer is Option B: 20.
