CA Final · Advanced Auditing, Assurance and Professional Ethics · Due Diligence, Investigation & Forensic Accounting

An auditor of Sagar Foods Ltd. is asked by the Audit Committee to perform a forensic investigation into suspected misappropriation by the finance head. The auditor is also the statutory auditor of the company. Under the Code of Ethics and the Companies Act, what is the most appropriate conclusion?

The auditor should assess whether the investigation falls within services barred by Section 144 and whether independence threats arise, and accept only if it does not and safeguards are adequate. Investigation work is neither blanket prohibited nor mandatory for a statutory auditor, and the Audit Committee's request does not remove evaluation.

1. AThe auditor cannot accept any investigation work, because it is always prohibited for a statutory auditor
2. BThe auditor may accept without any evaluation, since the Audit Committee is the client
3. CThe auditor should evaluate whether the assignment falls within services prohibited under Section 144 (such as internal audit or management functions) and threats to independence, and accept only if it does not, with safeguardsCorrect
4. DThe auditor must accept, because investigation work is mandatory for the statutory auditor