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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Advanced Auditing, Assurance and Professional Ethics

Case: Gopal Steel Ltd's board has engaged CA Firm Tara & Associates for statutory audit. The partner, CA Tara, also wants to provide internal audit services for the same company. The company's paid-up capital is Rs 60 crore and it is a listed company. What is the correct position under the Companies Act, 2013?

The statutory auditor cannot provide internal audit services to the company or its holding or subsidiary companies, because the Companies Act, 2013 lists internal audit among prohibited services. Using separate teams, getting audit committee approval or charging lower fees does not remove the prohibition.

  1. AShe may provide both services as long as separate teams are used
  2. BAn auditor cannot render internal audit services to the company or its holding or subsidiary companies, as this is a prohibited serviceCorrect
  3. CShe may do so with approval of the audit committee alone
  4. DShe may do so only if fees for internal audit are less than the audit fees

Explanation

The Companies Act, 2013 prohibits the statutory auditor from providing certain services to the company and its holding or subsidiary companies, including internal audit. Separate teams, audit committee approval or lower fees do not cure the prohibition.

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