other than a person who, or a firm that, is ineligible by virtue of this section to act as auditor of the licensee.

(2) Subject to this section, a person is ineligible to act as auditor of the holder of a licence if:

(a)

the person is not a registered company auditor; or

(b)

the person, or a body corporate in which the person has a substantial holding, is indebted in an amount exceeding $5,000 to the holder or, if the holder is a body corporate, to a related body corporate; or

(c)

the person is:

(i)

in the case of a holder who is a natural person—a partner or employee of the holder; or

(ii)

in the case of a holder that is a body corporate:

(A) an officer of the body corporate; or (B) a partner, employer or employee of an officer of the body corporate; or (C) a partner or employee of an employee of an officer of the body corporate.

(3) Subject to this section, a firm is ineligible at a particular time to act as auditor of the holder of a licence, unless:

(a)

at least one member of the firm is a registered company auditor who is ordinarily resident in a State or Territory; and

(b)

where the business name under which the firm is carrying on business is not registered under a prescribed law of a State or Territory—there has been lodged a return in the prescribed form showing, in relation to each member of the firm, the member's full name and the member's address as at that time; and

(c)

no member of the firm, and no body corporate in which any member of the firm is a substantial shareholder for the purposes of Part 6.7, is indebted in an amount exceeding $5,000 to the holder or, where the holder is a body corporate, to a related body corporate; and

(d)

no member of the firm is:

(i)

in the case of a holder who is a natural person—a partner or employee of the holder; or

(ii)

in the case of a holder that is a body corporate:

(A) an officer of the body corporate; or (B) a partner, employer or employee of an officer of the body corporate; or (C) a partner or employee of an employee of an officer of the body corporate; and

(e)

in the case of a holder that is a body corporate, no officer of the body corporate receives any remuneration from the firm for acting as a consultant to it on accounting or auditing matters.

(4) For the purposes of paragraphs (2)(b) and (3)(c), disregard a debt owed by a natural person to a body corporate if:

(a)

the body corporate is:

(i)

an Australian ADI; or

(ii)

a body corporate registered under the Life Insurance Act 1995 ; and

(b)

the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and

(c)

the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.

(5) For the purposes of subsections (2) and (3), a person is taken to be an officer of a body corporate if:

(a)

in any case—the person is an officer of a related body corporate; or

(b)

except where ASIC, if it thinks fit in the circumstances of the case, directs that this paragraph not apply in relation to the person in relation to the body corporate—the person has, at any time within the immediately preceding 12 months, been an officer or promoter of the body corporate or of a related body corporate.

(6) For the purposes of this section, a person is not an officer of a body corporate merely because of being or having been the liquidator of that body corporate or of a related body corporate. (7) For the purposes of this section, a person is not an officer of a body corporate merely because of having been appointed as auditor of that body corporate or of a related body corporate or, for any purpose relating to taxation, a public officer of a body corporate or merely because of being or having been authorised to accept on behalf of the body corporate or a related body corporate service of process or any notices required to be served on the body corporate or related body corporate. (8) Subject to this section, a person or firm must not, while ineligible by virtue of this section to act as auditor of the holder of a licence:

(a)

consent to be appointed as auditor of the holder; or

(b)

act as auditor of the holder; or

(c)

prepare a report that an auditor of the holder is to prepare under this Chapter.

(9) The appointment of a firm as auditor of the holder of a licence is taken to be an appointment of all persons who are members of the firm and are registered company auditors, whether resident in Australia or not, at the date of the appointment. (10) Where a firm that has been appointed as auditor of the holder of a licence is re-constituted because of the death, retirement or withdrawal of a member or members or because of the admission of a new member or new members, or both:

(a)

a person who was taken under subsection (9) to be an auditor of the holder and has so retired or withdrawn from the firm as previously constituted is taken to have resigned as auditor of the holder as from the day of the person's retirement or withdrawal but, unless that person was the only member of the firm who was a registered company auditor and, after the retirement or withdrawal of that person, there is no member of the firm who is a registered company auditor, section 858 does not apply to that resignation; and

(b)

a person who is a registered company auditor and is so admitted to the firm is taken to have been appointed as an auditor of the holder as from the date of the admission; and

(c)

the reconstitution of the firm does not affect the appointment of the continuing members of the firm who are registered company auditors as auditors of the holders;