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

Kapoor & Associates is a firm of auditors of Zenith Ltd. Which of the following, if it provides investment banking services to Zenith Ltd., would bring the firm within the prohibition through the Explanation to Section 144 of the Companies Act, 2013?

The separate entity in which a partner has significant influence or control. The Explanation to Section 144 treats services by any entity in which the firm or any partner has significant influence or control, or whose name or brand is used, as rendered indirectly by the firm. Investment banking is prohibited.

  1. AA firm that is a competitor of Kapoor & Associates with no link to it
  2. BA separate entity in which a partner of Kapoor & Associates has significant influence or controlCorrect
  3. CA bank that is a lender to Zenith Ltd.
  4. DAn entity in which neither the firm nor any partner has any influence, and which does not use their name

Explanation

For a firm, indirect rendering includes services through its partners, parent, subsidiary or associate entity, or any entity in which the firm or any partner has significant influence or control, or whose name, trade mark or brand is used. Investment banking is a listed service. The other options lack any such link.

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