11 August 2010
Dear sir, please consider the following example: XYZ Pvt. Ltd company, engaging in medical treatment services, there are two directors, and also share holders, who are also professionally qualified Doctor's. They employed some more doctors and who are also required bring a deposit of say Rs. 1,00,000/- each. which refundable at the time of leaving their employment. The company didnot keep that deposit money in a separate bank A/c, but it was utilised by the company business operations. While during statutory Audit, Auditor finds this issue which is in violation of section 417. However, the management contends this, since it is closely held company, it need not mentioned in Audit Report. Query: 1. What is the Auditor duties in this non-compliance of Section 417? 2. whether Auditor can make a qualified report or to accept a management contention?
11 August 2010
Company has violated section 417. Management's representation is not tenable. Auditor has to qualify his report. If 383A is applicable to company ,Company secretary in practice will also have to give a qualified compliance certificate in this regard.
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