New Policy of Empanelment of CA Firms/LLPs and Selection of Auditors for FY 2023-24

Policy of Empanelment of CA Firms/LLPs and Selection of Auditors

A.         Empanelment of CA firms/LLPs

Chartered Accountant firms (firms) and Limited Liability Partnerships (LLPs) in India with at least one full time [1] FCA Partner/FCA Sole Proprietor can apply for empanelment with this office for the purpose of appointment of auditors of Companies as per Section 139 (5) and 139(7) of the Companies Act 2013 and of Statutory Corporations/Autonomous Bodies as per the provisions of their respective Acts.  

The criteria for empanelment and selection of statutory auditors have been arrived at after due consultation with the Institute of Chartered Accountants of India.

All the empanelled firms/LLPs are awarded points.  The point score is calculated based on various parameters which are enumerated below.  In addition, in certain circumstances, the firms/LLPs are not empaneled or empaneled but not considered for appointment as auditors which are also explained below:

B.         Allotment of Audits

Selection of firms/LLPs for appointment as auditors where audit fee is up to Rs 5.00 lakh

The selection is made by correlating the point score of each firm/LLP with the audit fee of the auditee unit.

Selection of firms/LLPs for appointment as auditors where audit fee is more than Rs.5.00 lakh (Major Audits)

(a)      Criteria for short-listing eligible firms/LLPs of CAs for allotment of Major Audits are as under:

(i)       The firm/LLP should have at least 6 full time CAs (out of which 5 should be full time CA partners and one could be a full time paid CA employee), which is indicative of capacity to handle big audits .

(ii)       At least one full time CA partner should have an association of 10 years or more with the firm/LLP and at least 3 full time CA partners of the firm/LLP should have an association of 5 years or more with the firm/LLP and the remaining two full time CA partners should have an association of one year or more with the firm/LLP, to demonstrate stability over time.

(iii)   The firm/LLP itself should have been in existence for 10 years or more, to prove that it is a well established firm/LLP.

(iv) At least one of the full time CA partners of the firm/LLP must possess CISA qualification from ISACA, USA or DISA qualification from ICAI.

(v) The firm/LLP should have audit experience of five years of audits assigned by CAG.

(b) In addition to correlating the point score earned by each firm/LLP with the audit fee of the auditee unit, factors such as audit experience of the firm/LLP, capability of handling big audits, past performance, eligibility of the firm/LLP to conduct a particular audit, location of the firm’s/LLP’s branch offices etc. are also considered in selection of auditors for Major Audits.

Rotation of Audits

i.               The total period of appointment of a firm/LLP as auditor shall be for three financial years provided the firm/LLP continues to be eligible for the said audit, its point score has not reduced by more than 25 per cent over the previous year’s point score and the firm/LLP has not been debarred from appointment in the year by this office.

ii.             A firm/LLP who retires/surrenders from audit of a Maharatna Company, shall not be entitled for allotment of audit of any Maharatna Company for a period of four years after such retirement/surrender.

iii.           In case of a Maharatna/ Navratna Company, a firm/LLP after retiring/surrendering is not considered for the same Company for a period of five years.


[1] Full time CA partner/sole-proprietor does not include a person who is

(a) a CA partner in other firms/LLPs or a sole proprietor

(b)  Employed full time/part time elsewhere, practicing in their own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2(2) of the Chartered Accountants Act, 1949.

 (c)    i)    A CA Partner/sole-proprietor whose  compensation $ from the firm/LLP during previous financial year is below the following limit:

Compensation will be sum total of share of profit, remuneration and interest on capital received by the CA partner/sole-proprietor from the firm/LLP.   Compensation received by the CA partners who join during the previous financial year, will be extrapolated to arrive at the deemed compensation for the complete financial year. Compensation criteria of FCA will apply on CA partners/sole-proprietor who becomes an FCA during the previous financial year or thereafter till 1st January of year of filing application for empanelment.

(c)  ii)   A CA partner whose individual percentage share in the total compensation@  during the previous financial year is less than:

            Firms/LLPs having more than 14 CA partners                                   1%

            Firms/LLPs having 10 to 14 CA partners                                           3%

Firms/LLPs having 5 to 9 CA partners                                               5%

            Firms/LLPs having less than 5 CA partners                                       8%

@Total compensation will be sum total of share of profit, remuneration and interest on capital from the firm/LLP.   Compensation received by the CA partners who joins during the previous financial year, will be extrapolated to arrive at the deemed compensation for the complete financial year and then will be added to the compensation of other CA partners to arrive at total compensation.

(d) A CA partner/sole-proprietor whose professional income from sources other than the firm/LLP (except as permitted by ICAI) is more than the compensation (sum total of share of profit, remuneration and interest on capital) from the firm/LLP.

Full time CA employee does not include a person who is:

(a) a partner in other firms/LLPs or is a sole-proprietor

(b)  Employed full time/part time elsewhere, practicing in their own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2(2) of the Chartered Accountants Act, 1949.

 [2] Sole proprietors/CA partners/CA employees will get points if they were exclusively associated with the firm/LLP throughout the calendar year immediately preceding the year of empanelment.  Association with the firm/LLP prior to Formation Date will not be considered for any purpose.

 [3] In case of merger, the proprietor/CA partners of the merging firm/firms/LLP/LLPs will be assigned points after one calendar year of merger.  For the first five calendar years after merger, the merging CA partner/s would be deemed to have joined the firm/LLP from the date of merger.  The benefit of earlier association of the merging CA partners with the merging firm/LLP will be accorded to the merged firm/LLP only after five calendar years from the date of merger.

[4]  Basis of points for Turnover of the firm/LLP from Audit Services only (as distinct from other activities e.g. consultancy):

Sr No.Head office of the firm/LLP located in Mumbai, Delhi, Chennai, Kolkata, Bangalore, HyderabadHead office of the firm/LLP located at other Places
Rs. in crorePointsRs. in crorePoints
1Upto 1.00No pointsUpto 0.60No points
2>1.00 —-2.001>0.60 —1.201
3>2.00 —-3.002>1.20 —1.802
4>3.00 —-4.003>1.80 —2.403
5>4.00 —-5.004>2.40 —3.004
6>5.00 —-6.005>3.00 —3.605
7>6.00 —-7.006>3.60 —4.206
8>7.00 —-8.007>4.20 —4.807
9>8.00 —-9.008>4.80 —5.408
10>9.00 —-10.009>5.40 —6.009
11Above 10.0010Above 6.0010

[5] Basis of points for Peer Review Certificate from ICAI:

Sr. No.Firm/LLP holding valid peer review certificate from ICAI onPoints
11st January of the year of filing of online application5
21st January of the year preceding to year referred in sr. no. 14
31st January of the year preceding to year referred in sr. no. 24
41st January of the year preceding to year referred in sr. no. 33
51st January of the year preceding to year referred in sr. no. 43
61st January of the year preceding to year referred in sr. no. 52
71st January of the year preceding to year referred in sr. no. 62
81st January of the year preceding to year referred in sr. no. 71
91st January of the year preceding to year referred in sr. no. 81
 Maximum Points25

[6] Basis of points for audit experience

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