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

M/s Rao & Co., chartered accountants, are the statutory auditors of Veda Ltd. The firm's partner, through the firm, also does the book keeping of Veda Ltd.'s wholly owned subsidiary, Veda Retail Ltd. Under Section 144 of the Companies Act, 2013, this arrangement is:

The arrangement is prohibited. Section 144 bars the listed services, including accounting and book keeping, whether rendered to the company or to its holding or subsidiary company. Rendering them to the subsidiary therefore does not avoid the bar, and no fee comparison applies.

  1. APermitted, because the services are rendered to the subsidiary and not to Veda Ltd.
  2. BPermitted, if the subsidiary's Board approves it
  3. CProhibited, because the bar on listed services covers services to the company, its holding company or its subsidiary companyCorrect
  4. DProhibited only if the fees exceed the audit fees

Explanation

Section 144 bars the listed services whether rendered to the company, or its holding or subsidiary company. Accounting and book keeping is a listed service, so the subsidiary's Board approval or fee comparison does not cure it.

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