Internal Auditor Vs Stautory Auditor
This query is : Resolved
CA Saurabh
(Querist)
30 January 2011
can an internal auditor be appointed as the statutory auditor of the same company??? is converse true???
kindly reply back with text of the applicable section if any
kindly reply back with text of the applicable section if any
30 January 2011
The internal auditor is disqualified from being appointed since he is not in a position to express an independent opinion.
This was clarified by the DCA
Circular No. 29 of 1976, dated 27-8-1976 states that the internal auditor is appointed by the management and hence is in the position of an employee, whereas the statutory auditor is appointed by the company under section 224 and is required to perform the duties imposed on him under section 227 and the Rules/Orders issued thereunder.
The circular issued in 1976 was amended by circular 5/77 dtd 8.4.77, which clarified that the statutory auditor should not accept the job of an internal auditor.
Being an employee the internal auditor is disqualified from appointment.
Mr. B Stands disqualfied.
Since B is a parter in ABC, ABC is also disqualified from taking the engagement by virtue of the provisions of the companies act.
Other views solicited.
This was clarified by the DCA
Circular No. 29 of 1976, dated 27-8-1976 states that the internal auditor is appointed by the management and hence is in the position of an employee, whereas the statutory auditor is appointed by the company under section 224 and is required to perform the duties imposed on him under section 227 and the Rules/Orders issued thereunder.
The circular issued in 1976 was amended by circular 5/77 dtd 8.4.77, which clarified that the statutory auditor should not accept the job of an internal auditor.
Being an employee the internal auditor is disqualified from appointment.
Mr. B Stands disqualfied.
Since B is a parter in ABC, ABC is also disqualified from taking the engagement by virtue of the provisions of the companies act.
Other views solicited.
30 January 2011
Internal Auditor acting as Statutory Auditor:
Where an Internal Auditor is an employee of the company, he is disqualified for appointment as a Statutory Auditor. But where a company employs an outside firm to conduct its Internal Audit, the Internal Auditor does not become an employee of the company. Even in such a case, the Internal Auditor cannot be appointed as a statutory Auditor, because it will not be possible for him to give as independent and objective report under section-227 read with CARO, 2003.
As per CARO, 2003 Statutory Auditor has to state in his report whether there is adequate Internal Control System in the company….
So in no case internal auditor can be appointed as a statutory auditor or visa-versa.
Where an Internal Auditor is an employee of the company, he is disqualified for appointment as a Statutory Auditor. But where a company employs an outside firm to conduct its Internal Audit, the Internal Auditor does not become an employee of the company. Even in such a case, the Internal Auditor cannot be appointed as a statutory Auditor, because it will not be possible for him to give as independent and objective report under section-227 read with CARO, 2003.
As per CARO, 2003 Statutory Auditor has to state in his report whether there is adequate Internal Control System in the company….
So in no case internal auditor can be appointed as a statutory auditor or visa-versa.
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