Signature of audit reports ‑ Signing auditors’ report in firms name ‑ Whether legally valid - Companies Law - No. 26/72

Circular Letter : No. 26/72 [F. No. 14/12/72 ‑ CL-V] dated 29 ‑ 7 ‑ 1972. Subject:- Signature of audit reports ‑ Signing auditors report in firms name ‑ Whether legally valid On a review of the existing practices of signing auditors reports on the balance sheet and profit and loss accounts of companies in a firm name , this Department is advised that in view of sections 4 and 5 of the Indian Partnership Act, 1932, there cannot be a firm name without a contract of partnership between two or more persons. Hence, the question of a single chartered accountant carrying on his profession in a firm name should not arise. Nor can a firm be appointed in its firm name as auditor unless all the partners practising in India are qualified for appointment as auditor of a company as provided for in section 226. This again postulates the existence of two or more partners for a firm of chartered accountants to be appointed in its firm name as auditor. Further, as section 229 clearly provides that if a firm of chartered accountants is appointed as auditor, only a partner in the firm may sign the auditor s report or sign or authenticate any other document required by law to be signed or authenticated by the auditor, the practice of merely affixing the firm name on the audit report or such other document is not correct in the eye of law. In this Department s view the partner concerned should invariably sign in his own hand for and on behalf of the firm appointed to audit a company s accounts, and this is what is required by the provisions of the Act. The existing practice of a separate disclosure to Registrar about the identity of the partner of a firm the name of which is affixed to the auditor s report and other documents annexed thereto, will not suffice and is not a procedure contemplated by the statute. The aforesaid legal position may be brought to the notice of all the practising members of the Institute for their guidance in order to ensure a proper compliance with the requirements of section 229. Earlier circulars issued by this Department on the subject are hereby superseded.