A chartered accountant, or a partner of a CA firm, cannot be appointed auditor of a company if on the date of that appointment they already hold appointment as auditor of more than twenty companies. That is the company audit limit in section 141(3)(g) of the Companies Act, 2013. What surprises most practitioners is how the twenty are counted. One person companies, dormant companies, small companies and private companies with paid-up capital below ₹100 crore drop out of the count. They drop out only when the company making the appointment is itself a private company.
So the same partner, with the same client list, can be eligible to audit a private company and ineligible to audit a public company on the same afternoon. Below is the test as it stands on 2 November 2026, a worked count for one partner, the small-company figures that now decide most exclusions, and what happens to the company and the auditor when the limit is crossed.
What section 141(3)(g) actually says
Section 141(3) lists the persons who are not eligible for appointment as auditor of a company. Clause (g) covers two people. The first is anyone in full-time employment elsewhere. The second is a person, or a partner of a firm holding appointment as the company's auditor, who on the date of appointment or reappointment already holds appointment as auditor of more than twenty companies. The current text, with its amendment notes, is on ICAI Navi Mumbai's page for section 141 of the Companies Act.
Three features of the wording shape every later answer:
- It is a person-level test. The clause asks how many appointments the individual or the partner holds. Where a firm is appointed, section 141(2) allows only the partners who are chartered accountants to act and sign for it, so the count follows the partners who carry the work.
- The date is fixed. The count is taken on the date of appointment or reappointment, not across the financial year. Audits whose term has already ended, or from which the auditor has resigned before that date, are no longer held.
- The Act itself has no exclusions. The words that take small and private companies out of the count do not sit in the section. They come from an exemption notification under section 462, which is why they apply only in a private company's case.
The Companies (Amendment) Act, 2017 did touch section 141(3), but only clause (i) on non-audit services; the text of the 2017 amending Act leaves clause (g) as it was.
The four exclusions and where they come from
On 5 June 2015 the Ministry of Corporate Affairs issued its exemption notification for private companies (G.S.R. 464(E)). Item 9 of its table modifies clause (g) as it applies to private companies. After "twenty companies" it adds: other than one person companies, dormant companies, small companies and private companies having paid-up share capital less than one hundred crore rupees. A copy of the June 2015 notification on exemptions to private companies is hosted by the Institute of Cost Accountants of India.
The Institute of Company Secretaries of India reads the effect the same way in its ICSI note on section 141: the relaxation in clause (g) is only for appointment in a private company. When a public company appoints its auditor, the notification does not apply, and the unmodified clause counts every company audit the person holds.
| Type of company already audited | Counted when a private company appoints you | Counted when a public company appoints you |
|---|---|---|
| Listed or unlisted public company | Yes | Yes |
| Private company with paid-up capital of ₹100 crore or more | Yes | Yes |
| Private company with paid-up capital below ₹100 crore | No | Yes |
| Small company | No | Yes |
| One person company | No | Yes |
| Company holding dormant status under section 455 | No | Yes |
A dormant company here means one that has applied to the Registrar and obtained dormant status under section 455. A company that is merely idle does not qualify on its own. The Explanation to section 455 of the Companies Act describes an inactive company. In the last two financial years it has carried on no business or operations, made no significant accounting transaction, or filed no financial statements and annual returns. Such a company may apply for dormant status, and only the status takes it out of the count.
Which clients are small companies now
Because the small-company exclusion is the one that moves every year, check it client by client before each AGM season. Section 2(85) defines a small company as a company other than a public company whose paid-up capital and turnover are both within the prescribed limits. The proviso to the definition keeps out holding companies, subsidiary companies, section 8 companies and companies governed by a special Act, whatever their size.
The limits were last raised by G.S.R. 880(E) dated 1 December 2025, which substituted Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rules, 2014. From its publication, paid-up capital must not exceed ₹10 crore and turnover must not exceed ₹100 crore. The turnover test looks at the profit and loss account of the immediately preceding financial year, so a client whose FY 2025-26 turnover crossed ₹100 crore stops being a small company for an appointment made in 2026-27.
For the audit count, the holding and subsidiary carve-out matters less than it seems. A private subsidiary with ₹50 lakh of capital is not a small company, but it still drops out under the separate limb for private companies with paid-up capital below ₹100 crore, provided the appointing company is private. Where the appointing company is public, neither limb helps.
A worked count for one partner
Illustration. Neha is a partner in a CA firm. On 25 September 2027 she is proposed for appointment at two AGMs on the same day. Her existing statutory audit appointments on that date are:
- 4 public companies, two of them listed
- 3 private companies with paid-up capital of ₹100 crore or more
- 4 private companies with paid-up capital below ₹100 crore that are subsidiaries, so not small companies
- 12 small companies
- 2 one person companies
- 1 company with dormant status under section 455
That is 26 appointments in all. The two proposals come out differently:
- Appointment by Arvind Textiles Private Limited (paid-up capital ₹40 crore). The notification applies. Excluding the 4 subsidiaries, 12 small companies, 2 one person companies and 1 dormant company leaves 4 + 3 = 7 counted appointments. Seven is well within twenty, so Neha is eligible.
- Appointment by Sunrise Agro Foods Limited (an unlisted public company). The notification does not apply, so all 26 appointments count. Twenty-six is more than twenty, so Neha is not eligible, even though most of her clients are small.
The firm can still take the public company if another partner with a lower count is the one whose appointment is tested and who will sign. If Neha wants the work herself, she has to be below the line on 25 September 2027. In practice that means some of her existing terms must have ended at earlier AGMs, or been given up with proper resignation filings, before that date.
One boundary point. The clause disqualifies a person holding more than twenty. Read literally, someone holding exactly twenty on the appointment date is not yet caught, though the appointment would take them to twenty-one. The safer course is to treat twenty counted audits as the working ceiling and stay clear of a reading that is open to argument.
The certificate that puts the count on record
The limit is not just a rule for the auditor's own file. Before appointment, the auditor gives the company written consent and a certificate. Rule 4 of the Companies (Audit and Auditors) Rules, 2014 lists what that certificate must state. The individual or firm is eligible and not disqualified under the Act and the Chartered Accountants Act, 1949. The appointment is as per the term provided under the Act. And the proposed appointment is within the limits laid down by or under the authority of the Act. The company then files the notice of appointment in Form ADT-1.
The certificate is where a wrong count turns into a wrong statement. Keep a dated working behind it that lists each existing appointment, the company's CIN, its class (public, private, small, one person or dormant) and the figure used for paid-up capital and turnover. For a private appointing company, the working should show which appointments were excluded and why.
What happens if the limit is crossed
Section 141(4) deals with an auditor who becomes subject to a sub-section (3) disqualification after appointment: the auditor must vacate office, and the vacancy is treated as a casual vacancy. Clause (g), though, tests the count on the date of appointment. If the partner was already over the line that day, the appointment should never have been made, and the company has to appoint an eligible auditor and file a fresh ADT-1.
The money consequences sit in section 147 of the Companies Act. If a company contravenes any provision of sections 139 to 146, it is punishable with a fine of not less than ₹25,000, which may extend to ₹5 lakh. Every officer in default faces a fine of ₹10,000 to ₹1 lakh, after the Companies (Amendment) Act, 2020 removed the imprisonment option for them. An auditor who contravenes section 139, 144 or 145 faces a fine of at least ₹25,000, or four times the audit remuneration if that is lower. A knowing or wilful contravention can also bring imprisonment of up to one year.
How this differs from the tax audit limit
The company audit limit and ICAI's tax audit limit are often mixed up, and they work differently. ICAI's Limit on Number of Tax Audits Guidelines, 2025 cap tax audit assignments at 60 per member, and 60 per partner in a firm, for each financial year. The cap runs from 1 April 2026, as reported in BCAJ's summary of the ICAI notification. That cap is counted across a financial year and comes from ICAI's Council guidelines. The company audit limit is counted on the appointment date and comes from the Companies Act. A company that also needs a tax audit uses up one slot under each limit, and each has to be tested separately.
Changes proposed in the 2026 Bill
The Corporate Laws (Amendment) Bill, 2026, introduced in the Lok Sabha in March 2026 and referred to a Joint Parliamentary Committee, does not amend section 141(3)(g). Two of its proposals would still change the count if enacted. It would raise the ceilings in section 2(85) within which small-company limits can be prescribed, to ₹20 crore of paid-up capital and ₹200 crore of turnover. It would also add a section 139(12) letting prescribed classes of companies do without an auditor altogether.
As of 2 November 2026 the Bill is still pending, so the 2015 notification and the December 2025 small-company limits decide the count today. Before the next AGM season, recheck section 2(85), Rule 2(1)(t) and item 9 of the private company exemption notification for any change.
