CA Final · Advanced Auditing, Assurance and Professional Ethics · Internal Audit

Kaveri Industries Ltd's statutory auditor, M/s Rao & Co, is asked by the CFO to take over the company's internal audit for the current year, with the engagement approved by the Audit Committee. The firm proposes that the work be done by its associate entity, a separate LLP using the firm's brand name. What is the correct conclusion under the Companies Act, 2013?

The engagement is not permitted. Section 144 prohibits the statutory auditor from providing internal audit to the company or its holding or subsidiary, directly or indirectly, including through an associate entity or one using the firm's brand. Audit Committee approval cannot override the prohibited list.

1. APermitted, because the Audit Committee has approved the service and approval overrides the list in Section 144
2. BPermitted, because the work is done by a separate LLP and not by the firm itself
3. CNot permitted, because Section 144 bars the auditor from internal audit, whether done directly or indirectly, including through an associate entity or an entity using the firm's nameCorrect
4. DPermitted only if the internal audit is for the holding company and not for the company itself