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CMA Intermediate · Business Laws and Ethics · Operational and Financial Control

CA Nandini is the individual statutory auditor of Orion Ltd. Her brother, who is her relative, provides actuarial services to Orion Ltd. Under the Explanation to Section 144 of the Companies Act, 2013, the position is that:

Nandini is treated as rendering the service indirectly. The Explanation to Section 144 says that for an individual auditor, indirect rendering includes services through her relative or any connected or associated person. Actuarial services are prohibited, so audit committee approval cannot make them permissible.

  1. ANandini is not affected because she herself does no actuarial work
  2. BNandini is treated as rendering the service indirectly, as the term 'directly or indirectly' includes services through her relativeCorrect
  3. CThe service is permitted if it is approved by the audit committee
  4. DThe service is prohibited only if the brother is a partner in her firm

Explanation

For an individual auditor, 'directly or indirectly' includes services rendered through her relative or a connected or associated person. Actuarial services are a listed prohibited service, and approval cannot permit a prohibited service.

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