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CS Executive · Company Law and Practice · Accounts and Auditors

Kalyani Traders Ltd, which is not an investment or banking company, sold shares it held in another company at a price lower than its purchase cost. Which statement reflects the auditor's duty under Section 143(1)?

The auditor must inquire whether the securities were sold below their purchase price. Section 143(1)(c) imposes this inquiry for companies that are not investment or banking companies, with no condition about buyer identity or size of loss.

  1. AHe must inquire whether such securities were sold at a price less than the purchase priceCorrect
  2. BHe must inquire only if the shares were sold to a director
  3. CHe has no duty because share sales are Board decisions
  4. DHe must inquire only if the loss exceeds paid-up capital

Explanation

Section 143(1)(c) requires the auditor to inquire, where the company is not an investment or banking company, whether assets consisting of shares, debentures and other securities were sold at a price less than they were purchased for. No related-party or size condition exists in that clause.

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