The recently introduced audit cap restriction under the new company law should not apply to private limited companies, one-person companies and small companies.

A representation to this effect has now been made by the CA Institute to the Corporate Affairs Ministry.

The new company law stipulates that an auditor cannot accept audit of more than 20 companies.

Including private companies within the scope of the overall audit cap is “not well justified”, CA Institute President K Raghu said in a letter to the Corporate Affairs Minister Sachin Pilot.

This was also not discussed with the profession or exposed to the public for comments, Raghu said.

Considering the increase in the number of private limited companies, the current provision in the new company law as regards audit cap will create genuine difficulties for corporates and auditors, said the CA Institute letter.

This may also lead to an increase in the cost of audit for corporates as an auditor will only be able to audit 20 companies, it added.