Statutory Auditor Independence — the Rs 250 Crore Fee Cap

Statutory Auditor Independence explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Chapter VI of the Guidelines on Ethical Issues, 2026 prohibits accepting the statutory audit of a PSU, government company, listed company or other public company with turnover of Rs 250 crore or more where the total remuneration for other services to the same entity exceeds the statutory audit fee.

The restriction

A member of the Institute in practice shall not accept appointment as statutory auditor of:

• Public Sector Undertakings;
• Government Companies;
• Listed Companies; and
• other Public Companies having turnover of Rs 250 crore or more in a year,

where he accepts any other work, assignment or service in regard to the same undertaking or company on a remuneration which in total exceeds the fee payable for carrying out the statutory audit of that undertaking or company.

The test is a ratio, not an absolute

The restriction does not cap other-service fees at a rupee amount. It caps them relative to the statutory audit fee. So the question at acceptance is always:

Does the total remuneration for other work, assignments and services exceed the fee payable for the statutory audit?

If it does, the statutory audit cannot be accepted. If it does not, it can. A firm with a modest audit fee and a large advisory relationship fails the test; the same advisory work alongside a properly priced audit may not.

Associate concerns are aggregated — paragraph 6.1

The restriction applies in respect of fees for other work, services or assignments payable to the statutory auditors and their associate concerns put together.

This closes the obvious route of routing advisory work through a related entity. The audit firm's own fee and its associate concerns' fees are added before the comparison is made.

What counts as "other work" — paragraph 6.2

The terms "other work", "service" or "assignment" include:

• Management Consultancy; and
• all other professional services permitted by the Council pursuant to section 2(2)(iv) of the Chartered Accountants Act, 1949.

They do not include:

• audit under any other statute.

A stricter regulator prevails — the proviso

Where an appointing authority or regulatory body specifies more stringent conditions or restrictions, those apply instead of the conditions in these Guidelines.

So Chapter VI sets a floor, not a ceiling. Where a bank regulator, an insurance regulator, a securities regulator or a Comptroller and Auditor General appointment letter imposes tighter limits — for instance a prohibition on particular services regardless of fee ratio — the tighter rule governs. The Guidelines do not authorise anything a regulator forbids.

Worked example

A firm is offered the statutory audit of an unlisted public company with turnover of Rs 310 crore. Fees on the table:

Other work totals Rs 20,00,000 against a statutory audit fee of Rs 18,00,000. The total exceeds the audit fee, so the statutory audit cannot be accepted on these terms.

The firm's options are to decline the audit, to decline or reduce the other work so the aggregate falls below Rs 18,00,000, or to have the other work done by a genuinely unconnected firm. Note that increasing the audit fee to clear the ratio is a course that has to withstand scrutiny on its own merits.

Change one fact — the company is listed with turnover of Rs 60 crore. The Rs 250 crore threshold is irrelevant; the restriction applies because it is a listed company.

Acceptance checklist

• Classify the entity: PSU, government company, listed company — restriction applies regardless of turnover; other public company — apply the Rs 250 crore test.
• List every engagement with the entity, including those of associate concerns.
• Exclude audits under other statutes from the "other work" aggregate.
• Compare the aggregate against the statutory audit fee payable.
• Check the appointing authority's or regulator's own terms; a stricter rule displaces this one.
• Re-test on every renewal and every new advisory engagement during the term, not only at first acceptance.

Common mistakes

• Applying the Rs 250 crore threshold to listed companies and PSUs.
• Omitting associate concern fees from the aggregate.
• Including a tax audit or cost audit in the "other work" total.
• Testing only at appointment and not when a new advisory mandate is added mid-term.
• Relying on these Guidelines where the regulator is stricter.