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CMA Intermediate · Corporate Accounting and Auditing · Statutory Audit under the Companies Act, 2013

Under the Companies Act, 2013, the auditor of a holding company has an additional right in relation to subsidiaries and associate companies. Which one is it?

The auditor of a holding company can access the records of all its subsidiaries and associate companies, but only to the extent those records relate to consolidating their financial statements with the holding company's. The Act grants no power to remove directors or appoint subsidiary auditors.

  1. ARight to remove the directors of the subsidiary companies
  2. BRight of access to the records of all its subsidiaries and associate companies, so far as it relates to consolidation of financial statementsCorrect
  3. CRight to appoint the auditors of the subsidiary companies
  4. DRight to inspect the personal bank accounts of the directors of the associate companies

Explanation

The proviso to section 143(1) gives the holding company's auditor a right of access to the records of its subsidiaries and associate companies, but only in so far as it relates to consolidation. The other options describe powers that the Act does not give the auditor.

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