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Auditors appointment us 141

Vinay sawant (nothing) (176 Points)

22 April 2021

Whether an auditor can be appointed as an auditors of lilavati hospital ltd if he is indebted to company for Rs.7 Lacs for medical treatment of his father...?

another question is as follows:
whether the Rs.5 Lac limit of indebtedness is separate for each of the Company, it's holding, it's subsidiary, subsidiary of such holding company, and associate company ?

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6 Replies

lukyamuzi collin (10 Points)
Replied 22 April 2021

Whereas the auditor can perform the audit under the principle of professional competence, the auditor should avoid situations that may become threats to compliance with the fundamental principles, for example self interest.

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CA. Sourav Sarkar (Chartered Accountant ) (24583 Points)
Replied 22 April 2021

No, the auditor cannot be appointed in Lilavati hospital as he is indebted for 7 lakh rupees which is in excess of 500000 rupees.

No, the limit is not seperated. If the auditor indebted for
5 lakhs rupees in any of the subsidiary, holding or associate company, then he is ineligible to be appointed as auditor

lukyamuzi collin (10 Points)
Replied 22 April 2021

I think the auditor can be appointed, but its his duty to put it into consideration that there might be a conflict of interest which might override the audit opinion. the immediate solution if the appointment is made is to declare the conflict of interest and maybe get an audit partner to handle the audit.

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Vinay sawant (nothing) (176 Points)
Replied 22 April 2021

Ok thanks. and I think limit of indebtedness of 5 Lacs limit is for the entire group.

shubh sarkar (6 Points)
Replied 23 April 2021

In my opinion, Commercial transactions in ordinary course of business at arms length price are not to be considered as Indebtness..

but over this if you think that it might affect your Independence, avoid such appointment..