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

Which statement correctly describes the effect of an auditor rendering a service referred to in Section 144 to the company, on the basis of Section 141?

Rendering a Section 144 service makes the person ineligible for appointment as auditor under Section 141(3)(i). If this happens after appointment, the auditor must vacate office and the vacancy is treated as a casual vacancy under Section 141(4).

  1. AIt only attracts a warning and has no effect on eligibility
  2. BIt makes the person ineligible for appointment as auditor under Section 141(3)(i)Correct
  3. CIt is a disqualification only if the service continues for three years
  4. DIt matters only for firms and not for individual auditors

Explanation

Section 141(3)(i) lists as not eligible a person who directly or indirectly renders any service referred to in Section 144 to the company, its holding company or subsidiary. Under Section 141(4), a disqualification incurred after appointment requires vacating office, treated as a casual vacancy. No time period is prescribed, and the clause covers any person.

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