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

Ravi Kumar, a practising CA, is the statutory auditor of Greenfield Agro Ltd. During the year, the company's CFO requests him to also maintain the company's books of account and prepare its financial statements, for a separate fee. What is the correct position under the Companies Act, 2013?

The engagement is prohibited. Section 144 of the Companies Act, 2013 bars the auditor from providing accounting and book keeping services to the company it audits. Audit committee approval, using separate staff or disclosure does not lift the prohibition, so Ravi should decline the bookkeeping work.

  1. APermitted, provided the audit committee approves the fee
  2. BPermitted, as long as separate staff of the firm handle the audit
  3. CProhibited, as accounting and bookkeeping services are barred for the auditor of the companyCorrect
  4. DPermitted, provided the services are disclosed in the Board's report

Explanation

Section 144 prohibits an auditor from providing specified services to the company, its holding company or subsidiary, including accounting and book keeping services. Neither audit committee approval, separate staff nor disclosure removes this bar. Hence Ravi must decline the work.

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