CMA Intermediate · Business Laws and Ethics · Operational and Financial Control
CA Rohit Nair is an individual auditor of Sagar Foods Ltd. His brother, through a consulting entity in which Rohit has significant influence, provides investment advisory services to Sagar Foods Ltd. with the Board's approval. Which statement is correct under the Companies Act, 2013?
The service is prohibited. Investment advisory is a barred service, and for an individual auditor rendering it indirectly through a relative or an entity he significantly influences counts as rendering it himself. Board approval cannot permit a prohibited service.
- AThe service is permitted because Rohit does not personally render it
- BThe service is permitted because the Board approved it
- CThe service is prohibited only if Rohit's brother is a chartered accountant
- DThe service is prohibited because for an individual auditor, indirect rendering includes services through a relative or an entity in which he has significant influenceCorrect
Explanation
Investment advisory services are a listed prohibited service. For an individual auditor, 'directly or indirectly' includes services rendered through his relative or through any entity in which he has significant influence or control. Board approval applies only to services outside the prohibited list, and the relative's qualification is irrelevant.
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