Practising CA at Surat
26263 Points
Joined November 2009
Meaning of Indebtness according to Webster Dictionary :
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(a.) Placed under obligation for something received, for which restitution or gratitude is due; as, we are indebted to our parents for their care of us in infancy; indebted to friends for help and encouragement.
(b.) Brought into debt; being under obligation; held to payment or requital; beholden.
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An Auditor can’t accept fee in advance because if he does so; he would not be in a position to remain independent. The amount of Rs.1,000/- was fixed in the year 1956 when this amount was good enough.
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Unfortunately the same has not been amended.
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The theme behind not amending is :
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He should not accept fee in advance except some out of pocket expenses.
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The profession of Accountancy and Lawyers are altogether different. Lawyers generally accept fee in advance because chance of winning the case is only 50% ! Once a client loses his case in the courts of law; he would not be interested to pay fee to the advocate. That is why fee is paid/accepted in advance.
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Auditing profession is altogether different. After conducting audit only; the fee becomes due. That is why auditors are entitled to lien books of account if his fee is not paid. Otherwise there would be no such need to make provisions in the statute like this.
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The concept of making such provisions is to discourage accepting fee in advance. The provision is important when now-a-days fees are paid in certain lacs or even crores.
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Whether an auditor would “feel” independent if he accepts fee is advance say Rs.50 Lacs !
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So law says if he is indebted exceeding Rs.1,000/- he is disqualified from auditing. 
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