CAN A DIRECTOR (CA) OF A COMPANY SIGN AUDIT OF A CLIENT CO.

This query is : Resolved

vinay (Querist)
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27 April 2009 HI EXPERTS,

REPLY AT THE EARLIEST......

A DIRECTOR (WHO IS ALSO A PRACTICISING CHARTERED ACCOUNTANT) OF A COMPANY (X LTD). A COMPANY (Y LTD)WHO PROVIDES SERVICES TO X LTD.

CAN DIRECTOR SIGN THE BALANCE SHEET OF Y LTD?

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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27 April 2009 As per section 226(3), the persons are not qualified for appointment as auditors of a company are :
(a) a body corporate;
(b) an officer or an employee of the company;
(c) a person who is a partner, or who is in the employment of an officer or employee of the
company;
(d) a person who is indebted to the company for more than Rs. 1,000 or who has given any
guarantee or provided any security in connection with the indebtedness of any third person to the
company for more than Rs. 1000; and
(e) a person holding any security of that company.

the director is not falling is the above limb , so he can audit

Ankur Garg

Ankur Garg (Expert)
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30 April 2009 Well the answer is not that simple as Mr. Manmohan mention it.

The position of Mr. Director + CA is very Vulnerable as he is directly interested in the company Y Limited. Such position apparently effect the independence of Mr. Director and make him bias in favour of Y limited because Y limited is providing service to the X limited of which he is a director.

I would suggest avoid such risky situation and also check any guidance issued by ICAI to avoid any future problem...

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CS ,CMA Shambhu Kr. jha

CS ,CMA Shambhu Kr. jha (Expert)
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18 October 2010 A director can not hold the post of auditor at the same time if a director is a pca than he have two option either to surrender his pca certificate as mentioned in ca guide lines or work as a pca , both work can not be do at a same time because directors have direct connection to the business , and of course he will not be eligible to appoint as an director .