Audit

CAG Empanelment of CA /LLPs Firms & Selection of Auditors

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New CAG Policy of Empanelment of CA Firms/LLPs and Selection of Auditors for Financial Year 2023-24

Introduction

In India, Chartered Accountant firms and Limited Liability Partnerships with at least one full-time Fellow Chartered Accountant partner or FCA sole proprietor are eligible to apply for empanelment with the Comptroller and Auditor General of India. The objective of this empanelment is to facilitate the appointment of auditors for government companies under Sections 139(5) & 139(7) of the Companies Act, 2013, and for statutory corporations or autonomous bodies as per their governing statutes.

Criteria for Empanelment

The CAG Policy of Empanelment of CA Firms/LLPs for FY 2025–26 outlines the revised criteria for The empanelment criteria have been developed in consultation with the Institute of Chartered Accountants of India. Points are awarded to firms/LLPs based on quantitative and qualitative parameters. In certain cases, firms may either be denied empanelment or not considered for audit allotments despite empanelment, due to disqualifications or past conduct. the empanelment and selection of auditors for government companies and statutory corporations. Here’s a summary of key highlights from the document:

Eligibility:

CA firms/LLPs must have at least one full-time FCA partner or sole proprietor.
Empanelment is for appointment as auditors under:
- Section 139(5) and 139(7) of the Companies Act, 2013.
- Respective statutes of statutory corporations/autonomous bodies.

Scoring Parameters (Total score based on 100+ points):

Quantitative Parameters

Parameter	Maximum Points
Full-time FCA partners (up to 20)	3 points each for first 5, half thereafter
Full-time ACA partners	2 points each
Years of association	Up to 2 points per partner
Full-time CA employees (up to 20)	1 point each for first 5, half thereafter
Firm experience	0.5 points/year, max 10
Audit turnover only	Max 10 points

Qualitative Parameters

Parameter	Maximum Points
Peer Review by ICAI	25 points
Audit experience (e.g., PSU audits)	40 points
Additional qualifications of partners (e.g., DISA, CISA, CPA)	25 points
Additional qualifications of employees	20 points

Additional Qualifications (Maximum 25 Points)

7(a) Recognized Professional Certifications

These international and specialized certifications are awarded 1.25 points each, subject to the following conditions:

Eligible Certifications:
1. DISA – Diploma in Information Systems Audit (ICAI)
2. CISA – Certified Information Systems Auditor (ISACA, USA)
3. CPA – Certified Public Accountant (AICPA, USA)
4. CIA – Certified Internal Auditor (IIA, USA)
5. CFE – Certified Fraud Examiner (ACFE, USA)
Award Criteria:

- Only one qualification per full-time CA partner/sole proprietor is considered.
- A maximum of 20 full-time CA partners can be awarded points under this sub-criterion.
- Maximum points possible from this category: 25 points.

7(b) ICAI Certification Courses

These domestic, sector-specific certifications from ICAI are awarded 1 point each:

Eligible ICAI Courses:
1. IND AS
2. Forensic Accounting and Fraud Prevention
3. Public Finance & Government Accounting
4. Concurrent Audit of Banks
5. Anti-Money Laundering Law
6. Forex and Treasury Management
7. Goods and Services Tax (GST)
Award Criteria:

- 1 point per course completed.
- Points awarded in addition to 7(a), but the total of Section 7 (a + b) is capped at 25 points.

Additional Qualifications – Full-Time CA Employees (Maximum 20 Points)

8(a) Recognized Professional Certifications (1 Point Each)

Eligible Certifications:
1. DISA – Diploma in Information Systems Audit (ICAI)
2. CISA – Certified Information Systems Auditor (ISACA, USA)
3. CPA – Certified Public Accountant (AICPA, USA)
4. CIA – Certified Internal Auditor (IIA, USA)
5. CFE – Certified Fraud Examiner (ACFE, USA)
Award Criteria:

- 1 point per employee for one qualification only (even if the employee holds multiple).
- Maximum of 20 full-time CA employees can be considered under this sub-category.
- Maximum points under 8(a): 20 points.

8(b) ICAI Certification Courses (0.5 Point Each)

Eligible ICAI Courses:
1. IND AS
2. Forensic Accounting and Fraud Prevention
3. Public Finance & Government Accounting
4. Concurrent Audit of Banks
5. Anti-Money Laundering Law
6. Forex and Treasury Management
7. Goods and Services Tax (GST)
Award Criteria:

- 0.5 point per ICAI course completed.
- These points are in addition to 8(a), but total points under Section 8 (8a + 8b) are capped at 20 points.

Professional Track Record

Professional Misconduct: 10%-point reduction per guilty CA (partner, proprietor, or employee).
Unsatisfactory PSU Audit Performance: 10%-point deduction.
Refusal of CAG-Allotted Audits:
- First refusal: 10% point deduction.
- Second refusal: Debarment for 5 years.
Adverse Comments from QRB/NFRA: 10% deduction or debarment as applicable.
Debarment by Regulator/Government: Firm not empanelled during debarment period.
CBI/ED Convictions or Trials: Disqualification from empanelment or audit allotment.

Allotment of Audits

Audit Fee up to ₹5 Lakhs
- Selection is based on correlating the firm’s score with the audit fee.
Audit Fee above ₹5 Lakhs (Major Audits)
- Eligibility criteria:
  - At least 6 full-time CAs, including 5 partners.
  - One partner with ≥10 years association; three with ≥5 years; two with ≥1 year.
  - Firm must be at least 10 years old.
  - At least one partner with DISA/CISA qualification.
  - At least 5 years of CAG-audit experience.
- Other factors: experience, capacity, performance, branch location, etc.

Rotation of Audits

Tenure of appointment is up to 3 consecutive financial years, subject to continued eligibility and satisfactory performance.
A firm that retires/surrenders from a Maharatna company audit:
- Not eligible for Maharatna audit for 4 years.
- Not eligible for the same company for 5 years.

Deductions & Penal Consequences

Issue	Penalty
Professional misconduct (CA partner/employee)	10% score reduction
Unsatisfactory audit performance	10% score reduction
Audit refusal (without valid reason)	10% reduction; repeat leads to 5-year ban
QRB or NFRA reprimands	10% score reduction

Professional Track Record – Deductions and Disqualifications

Clause	Parameter	Impact on Firm/LLP
9	Professional Misconduct by Member (as per ICAI)	🔻 10% point deduction per individual (sole proprietor/CA partner/employee) held guilty during the previous year under the Chartered Accountants Act, 1949. ❌ No credit given for such CA in empanelment.
10	Unsatisfactory PSU Audit Performance	🔻 10% point deduction if firm/LLP received an advisory for poor performance in the immediately preceding year.
11	Refusal of CAG-Allotted Audit	🔻 10% point deduction for first-time refusal (without legitimate disqualification). ❌ Second refusal → Debarment for 5 years from subsequent empanelment.
12	Advisory by Quality Review Board (QRB)	🔻 10% point deduction for any advisory issued by QRB in the previous year.
13	Action by National Financial Reporting Authority (NFRA)	🔻 10% point deduction for advisory/caution/monetary penalty. ❌ Debarment if barred by NFRA (with or without penalty), for the duration of debarment.
14	Debarment by Regulator or Govt. Authority	❌ Not empanelled for the period of debarment.
15	Conviction or Charges by CBI/ED	❌ Not empanelled if any CA partner/employee is convicted in such cases. ❌ No audit allotment if a charge sheet is issued or case is under trial against the firm/partner/employee.

Rotation of Audits

Tenure of Appointment

Appointment of a firm/LLP as auditor is typically for one financial year.
Re-appointment is allowed year to year, but the total tenure (including initial appointment) should not exceed three years, unless exceptional circumstances exist.
A firm may not be re-appointed if:
- It becomes ineligible.
- Its point score drops by more than 25% compared to the previous year.
- It is debarred or has any other legitimate disqualification as determined by the CAG office.

Post-Retirement/Surrender Restrictions (Maharatna Companies)

A firm/LLP that retires/surrenders from the audit of a Maharatna company:
- Will be barred from auditing any Maharatna company for a period of 4 years.

iii. Same Company Restriction (Maharatna / Navratna Companies)

A firm/LLP that retires/surrenders from a Maharatna or Navratna company:
- Will not be eligible for reappointment in the same company for 5 years.

Clarifications on Full-Time Association

[1] Full-Time CA Partner/Sole Proprietor — Not Considered If:

Is a partner in other firms or a sole proprietor elsewhere.
Employed full-/part-time elsewhere or involved in independent practice or other activities under Sec. 2(2) of the CA Act.
Compensation received in the previous FY is below threshold (based on firm location and designation):

Category	Metro Cities (₹ lakh)	Other Cities (₹ lakh)
FCA	6.00	3.60
ACA	3.60	2.40

Share in firm’s total compensation is below threshold:

No. of Partners	Minimum Share Required
>14	1%
10–14	3%
5–9	5%
<5	8%

Professional income from other sources exceeds firm compensation.

[1] Full-Time CA Employee — Not Considered If:

A partner elsewhere or a sole proprietor.
Employed/engaged in other practice/activity under Sec. 2(2) of CA Act.

[2] Points Eligibility

Points awarded only to those CAs (partners, proprietors, employees) who were exclusively associated with the firm throughout the calendar year preceding empanelment.

[3] Merger Clause

In mergers:
- Partners of merging entities earn points only after one calendar year.
- For the first five years, they are treated as having joined on the date of merger.
- Earlier association counts only after 5 years from merger date.

[4] Audit Turnover-Based Points

Audit Turnover (₹ crore)	Metro Cities	Points	Other Cities	Points
≤ 1.00 / 0.60	—	0	—	0
1–2 / 0.60–1.20	✓	1	✓	1
…	…	…	…	…
>10.00 / >6.00	✓	10	✓	10

[5] Peer Review Points

Based on valid Peer Review Certificate as of January 1 of relevant years:
- Current year: 5 points
- Each earlier year: Decreasing scale (max 25 points total)

[6] Audit Experience Points (based on UDINs)

Statutory Audits – Corporate

Turnover Band	Points	Max Points
₹40–100 Cr	3	20
₹100–250 Cr	4
> ₹250 Cr	5

Statutory Audits – Branch

Turnover Band	Points	Max Points
₹40–60 Cr	1	10
₹60–100 Cr	2
₹100–250 Cr	3
> ₹250 Cr	4

Internal Audits (Turnover > ₹40 Cr)

2 points per audit, max 5 points.

Audit of Government Schemes (Expenditure > ₹40 Cr)

2 points per audit, max 5 points.

Points will be based on UDINs generated in FYs 2020–21 through 2023–24. From FY 2026–27 onwards, 5-year UDINs will be considered. Other Notable Points:

Audit experience is given significant weight.
Peer Review Certificate is critical to score high.
A firm can be disqualified or debarred for non-compliance or repeated violations

CAG Empanelment Status update Fiancial Year 2025–2026

We would like to inform you that the provisional empanelment status of the firm, along with the provisional point score for the Fiancial Year 2025–2026, has been made available by the Office of the Comptroller and Auditor General of India (CAG). You may log in to the official website www.care.cag.gov.in to check the details. Availability Period From: 09 June 2025 To: 18 June 2025,

Please log in using your firm credentials to Verify the provisional empanelment status. and Check the provisional point score. CA Firm must report any discrepancies or issues, if any, to the CAG office within the stipulated time frame. It is important to ensure that all information is accurate, as this empanelment is crucial for audit assignments for the upcoming year.

Conclusion

The Comptroller and Auditor General of India empanelment process is a structured and merit-based system that scores CA firms and LLPs based on objective parameters. With the ultimate goal of ensuring competent and compliant audit practices across public sector undertakings and statutory bodies, this policy establishes transparent, performance-linked eligibility criteria that emphasize capability, ethics, and accountability.