Section 226 provides for qualifications of auditors. A person who is a Chartered Accountant in practice
is qualified to become
an auditor. In other words, he must be a member of the
Institute of Chartered Accountants of India and in practice. However, none of
the following persons, even though qualified as above, can be appointed as
auditor of a company: (i) a body corporate; (ii) an officer or employee of the
company (officer includes a director, manager or secretary); (iii) a person who
is a partner or who is in the employment of an officer or employee of the
company; (iv) a person who owes the company more than Rs 1,000 or who has
guaranteed the repayment of any debt of more than Rs 1,000 due to the company
by a third person; (v) a person holding any security of that company after a
period of one year from the date of commencement of the companies (Amendment)
Act,2000. The term 'security' here means an instrument which carries voting
rights; (vi) a person who is disqualified for appointment as auditor of the company's
subsidiary or holding company, or a subsidiary of its holding company. If an
auditor becomes disqualified in any of the above ways after his appointment as auditor,
then he shall be deemed to have vacated his office as such.
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