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CA Intermediate · Auditing and Ethics · Ethics and Terms of Audit Engagements

CA Deepa is statutory auditor of Bharat Auto Components Ltd. The company's management wants her firm also to carry out its internal audit and maintain its books of account. Under Section 144 of the Companies Act, 2013, what is the position?

Neither service is permitted. Section 144 of the Companies Act, 2013 prohibits the statutory auditor from rendering services such as accounting and bookkeeping and internal audit to the company or its holding or subsidiary company, regardless of separate fees or audit committee approval.

  1. ABoth services are permitted if fees are charged separately
  2. BOnly internal audit is prohibited, bookkeeping is permitted
  3. CNeither is permitted, as the auditor cannot render these services to the company or its holding or subsidiary companyCorrect
  4. DBoth are permitted with the approval of the audit committee alone

Explanation

Section 144 bars an auditor from providing certain services to the company, its holding company or subsidiary, including accounting and bookkeeping services and internal audit. Separate fees or audit committee approval do not lift the prohibition, so the option permitting only one of them is also wrong.

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