the query is regarding applicability of the Indian companies act and other applicable legislation of a partner of the stautory auditors of a listed company(abc ltd.) appointed as a director on the board of a 100% subsidiary company registered and incorporated in a foreign country.
it is also pertinent to clarify that the aforesaid partner of the auditors firms is not a signatory to the annual accounts and auditors report of M/s abc tld..
Q. whether the partner of the statutory auditors firm can be appointed by M/S ABC ltd. on the board of its 100% foreign subsidiary even if such partner is not auditing / signing the annual reports and auditors report?
Am not aware of any provisions Relating to above issue...But going by prudence appointment of statutory auditors as director of susdiary co would not provide Auditor with one of basic aspects of Audit that is INDIPENDENCE...
I may be wrong also...please let me know if u find correct answer..
02 June 2008
hi Shruti, pls have some patience, ans. is long:
226 (1): if all partners of a firm are elegible to be appointed as auditors of that company, the firm can be appointed as auditor of that co.
sec 226(3) : if a person is a officer or employee of a company, he can't be appointed as auditor of that co.
sec. 226(4): clearly says that a person can't be appointed as auditor of the company, if he is not eligible to be appointed as an auditor of that company's holding or subsdiary co.
226(5) : if auditor becomes disqualified for any reason after the appointment, he will be deemed to vacate his office (office of auditor).
now i summarise:
1) in ur case, a partner bacame director of subsidiary, means he is now disqualified to be appointed as auditor of that subsidiary by virtue of 226(3).
2)means, he can't be appointed as auditors of ur company (holding co.) also, by virtue of sec 226(4)
3)if he is disqualified, it means firm is also disqualified to be appointed as auditor, by virtue of sec. 226(1)
4)if firm become disqualified, it is deemed to have vacated its office (auditors' office), by virtue of sec. 226(5).
5)in nut shell, if a partner is appointed as director of a subsidiary, the firm can't act as auditor of that holding company.
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