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Please Help Audit Appointment

CA SHAFI SIDDIQUI (Ca in Practice) (228 Points)

04 May 2010

ABC & Co, Chartered Accountants acquired a Laptop worth Rs 57,000 from Sheetal Electronics(Firm) who also happen to be their auditee client. The payment is yet to be made. Can ABC & Co, act as auditors of Sheeta Electronics, while the payment is still due??

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4 Replies

(Guest)

no abc and co. can not become auditor of sheetal co.

because in disqualification u/s 226 a person who is indebted to the co. for rs. more than 1000 is disqualified for appointment in such a firm.

(Guest)

it is also immaterial whether the credit period is given to all the customers.

Devendra (Chartered Accountant) (4775 Points)
Replied 13 May 2010

According to section 226(3)(d) , if a person is indebted with an amount exceeding Rs. 1000 or has given security in connection to the indebtedness then the appointment of such person as an auditor is void. In your case, the person is indebted with an amount of Rs. 57000, so his appointment is invalid.

Thank You :)

Somaas Kandan (CA Final) (385 Points)
Replied 14 May 2010

Yes, they can act as an Auditor of Sheetal electronics this year i.e upto AGM, b'coz at the time of their appointment in the last year AGM, they are not debtor in that firm. But they cannot reappoint as an auditor in this AGM, if they still be a debtor.

please forgive me if my answer is wrong.