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CS Professional · Compliance Management, Audit and Due Diligence · Concepts of Various Audits

Kaveri Chemicals Ltd has appointed a cost accountant in practice as its cost auditor. The firm is also engaged by the company to design and implement its internal audit system. Which statement best reflects the position on the cost auditor's eligibility?

The cost auditor is disqualified. A person engaged in the company's internal audit, including designing its internal audit system, cannot be its cost auditor because independence is compromised. Neither shareholder approval nor a lower internal audit fee removes this conflict.

  1. AThe appointment is valid because internal audit work is a cost accounting service
  2. BThe appointment is valid if the shareholders approve the dual role by special resolution
  3. CThe cost auditor is disqualified, as one engaged in internal audit of the company cannot be its cost auditorCorrect
  4. DThe appointment is valid if the cost auditor's fees for internal audit are below the cost audit fee

Explanation

A person appointed as cost auditor must be independent, and one who is engaged in the company's internal audit or in designing and implementing its internal audit system is not eligible to act as cost auditor. Neither shareholder approval nor a lower fee cures the conflict.

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