CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Governance Influencers

Orchid Realty Ltd pays its statutory auditor a large separate fee for management consulting and internal audit outsourcing. An independent director argues this threatens the auditor's role as gatekeeper. What is the strongest basis for the concern?

The concern is valid because large non-audit fees create self-interest and self-review threats that weaken objectivity. The Companies Act, 2013 therefore bars the auditor from specified services such as internal audit and management services, to keep the gatekeeper independent.

1. ANon-audit services create a self-interest and self-review threat that can compromise objectivity, so the Act bars certain servicesCorrect
2. BNon-audit services are barred only if the fee is below the audit fee
3. CNon-audit services automatically increase the audit committee's powers
4. DNon-audit services matter only for unlisted companies