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

CA Vikram is the statutory auditor of Sagar Metals Ltd. The company wants him to also carry out its internal audit during the same year. Under the Companies Act, 2013, which position is correct?

CA Vikram may not accept the internal audit work. The Companies Act, 2013 specifically bars a statutory auditor from rendering internal audit services to the company or its holding or subsidiary companies. Audit committee approval or the company being unlisted does not remove this prohibition.

  1. AHe may do so if the audit committee approves in writing
  2. BHe may do so since internal audit is a non-audit service allowed to all auditors
  3. CHe may not do so, because rendering internal audit services to the company is prohibited for its statutory auditorCorrect
  4. DHe may do so only if the company is unlisted

Explanation

Section 144 of the Companies Act prohibits the auditor from providing, directly or indirectly, certain services to the company, including internal audit. This prohibition applies regardless of audit committee approval or whether the company is listed. Hence the only correct position is that he may not do so.

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