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CA Intermediate · Auditing and Ethics · Ethics and Terms of Audit Engagements

Meera, a practising CA, is the statutory auditor of Kaveri Foods Ltd. During the year she also offers to the company internal audit of its functions, as an additional engagement. Management asks her to accept it. Under Section 144 of the Companies Act, 2013, what is the position?

Meera cannot render internal audit services to Kaveri Foods Ltd. while she is its statutory auditor. The Companies Act prohibits an auditor from providing internal audit and certain other services to the company, and approval, fee size or using another partner does not cure the prohibition.

  1. AShe cannot render internal audit services to the company while being its auditorCorrect
  2. BShe may do so if the Audit Committee approves it in writing
  3. CShe may do so if the fee is less than the statutory audit fee
  4. DShe may do so if the internal audit is done by a different partner of her firm

Explanation

Section 144 prohibits an auditor from providing to the company, its holding company or subsidiary the services specified in Section 144, which include internal audit. Neither audit committee approval, a lower fee nor a different partner removes the prohibition, because the restriction applies to the auditor, including the firm.

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