Appointment of as auditor

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Querist : Anonymous

Querist : Anonymous (Querist)

01 November 2013 Dear Sir,

Can a DIRECTOR of parent company can be appointed as auditor of subsidiary company.

Ajay Mishra

Ajay Mishra (Expert)
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01 November 2013 CODE OF ETHICS — Salient provisions
A Chartered Accountant in practice is PROHIBITED:
• to pay commission/brokerage or share of profits of his professional business to/with any person other than a member of the Institute.
• from soliciting clients or professional work by circular, advertisement etc. except for advertisement as per the guidelines dt.14th May, 2008 issued by the Council
• from being Director of a Holding Company in whose subsidiary he is the auditor.
• from responding to advertisements inviting application for appointment of auditors, tenders or circulars or enquiry (made to more than one member) inviting quotation restricted to CA.

However members can respond to tenders in the areas where they compete with non CAs. They can also respond to tenders in the audit field outside the country provided the fees are received in foreign currency. The members are permitted to pay a reasonable amount as price for tender/bid document. In general no earnest money/security deposit is permissible in areas which are exclusive to Chartered Accountants as per Law. However, in non-exclusive area the members are permitted to pay earnest money/security deposit. If only Chartered Accountants are invited in non-exclusive area, the members are permitted to pay reasonable amount towards earnest money/security deposit.
• from expressing his opinion on financial statements of any business or enterprise in which one or more persons who are his ‘relatives’ within the meaning of Section 6 of the Companies Act, 1956 have, either by themselves or in conjunction with such member, a substantial interest in the said business or enterprise.

Querist : Anonymous

Querist : Anonymous (Querist)

01 November 2013 thanks sir and what about the sister concern
for eg:- company A (Listed Company)and company B (public company) are sister concern by Same Management.
Company A appoint Mr AB as a Non-Executive Director who is a CA by profession.
Now Company B wants to appoint MR. AB(CA) as auditor for FY.

Sir my query is can Company B appoint Nr AB as Auditor

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Ajay Mishra

Ajay Mishra (Expert)
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01 November 2013 No, he can not do, because his Audit Report will not be considered as Independent Audit Report.

Querist : Anonymous

Querist : Anonymous (Querist)

01 November 2013 thanks sir can you be explain with sec or clause of any act or rules

Ajay Mishra

Ajay Mishra (Expert)
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01 November 2013 For more details, contact to the Institute or mail for it.