Shares purchased by auditor of auditee company

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

18 March 2011 As per Companies Act and CA Act, statutory auditor cannot purchase shares of auditee company.
My query is that whether this provision also apllies to internal auditor or not?

Please reply.

Abhishek

Abhishek (Expert)
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18 March 2011 Legally not required to be, but best practice is to ensure that they do not hold shares so that they can be independent. Especially, the statutory auditors need to report whether internal audit was conducted and on internal controls. Therein, they have duty to see if the internal auditors are independent or not and if they have the requisite qualification or not...

sai swaroop munaga

sai swaroop munaga (Expert)
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18 March 2011 Legally speaking, This clause doesn't applies to the Internal Auditors.

The main job of an internal auditor is to assure the management about the accuracy of the books of the company and assessing the internal control procedures.

So, Having shares in the company doesn't affect the independence of the Auditor. Moreover it makes internal auditor more dedicated to the management.