Statutory Auditor & Internal Auditor

THE STATUTORY AUDITOR WILL HAVE TO DISCLOSE THE ABOVE FACT IN HIS AUDIT REPORT.

i think if we appoing the stat auditor in which firm internal auditor is also the partner..then it violate the independency of the stat auditor ...which is most important..

thanks,

Anil

Hi Satish,

You will not find the answer to your question in Companies Act because it is covered in 'Professional Ethics'.

According to ethics, appointment of Mr. A as a Statutory Auditor of XYZ Ltd. (where his partner is Internal Auditor) is INVALID. This is because independence of an Auditor will be hurt.

As his appointment itself is not proper, question of disclosing it in Audit Report doesn't arise.

It will attract the independency norms as per Professional ethics.

It does not cover under Companies Act since CA's are mainly covered by CA Act and Professional ethics.

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.

an internal auditor cannot be a statutory auditor of the same company even though one partner is internal auditor and the other is statutory auditor the same position still remains the same 

yes i agree with ravi sir that the same person/firm which in the position of internal auditor of a company should not be the stat auditor of the same company as it attracts disqualification of auditor u/s 224.