Auditor's disqualification

Hi Pankaj,

My view is that as on reading sections Section 141(3)(i) and explanation (ii) to Section 144 of the Companies Act, 2013 B is not eligible to be appointed as statutory auditor of S2.

The basis for arriving at such a view is explained below.

As per section 144, an auditor appointed under this Act shall provide to the company only such other services as are approved by the board of directors or audit committe as the case may be, but which shall not include any of the following services (whether such services are renderred directly or indirectly to the company or its holding or subsidiary company, namely;-

1. accounting and book keeping services

2.internal audit

3. design and implementation of any financial information system,

4. acturial services

5. investment advisory services

6. investment banking services

7. rendering of outsourced financial services

8. management services

9. any other kind of services as may be prescribed

Explanation (ii) to Section

For the purpose of this sub-setion, the term "directly or indirectly" shall include rendering of services by the auditor,

(ii) in case of auditor being an firm, either itself or through of its partners or through its parent, subsidiary or associated entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners.

Others views are also welcome.

Regards,

Arjun Rajagopal

Hello Arjun,

I think this case is not covered under section 144 as companies covered in this section are holding & subsidiary company and in this case there are two subsidiary of a Holding company.

Hi Pankaj,

Pls go through section 144 and explanation to section. Kindly wait for others views. My interpretation may be wrong.

Explanation (ii) clearly says auditor who is related to an associated entity directly or indriectly cannot render any other services to the company.

since A is the internal auditor of S1 how can B be appointed as statutory auditor of S2? When A and B are related? Kindly provide your interpretation.

Regards,

Arjun Rajagopal

Arjun,

Explanation (ii) of section 144 talks about the relation of two ca firms (auditor) its not about the relation of two companies (auditee).

Pankaj, 

Iam still confused. May be expert opinion is required on this subject. Lets wait for others views.

Regards,

Arjun Rajagopal

Please read section 141 clause (e) i think this case may be covered under that clause but i m not sure whether the service of internal audit will cover in business relationship or not.