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Ca final audit question paper query - reply

Moyyad Zapawala (Chartered Accountant) (425 Points)

25 November 2012

Hello friends, I have one query in nov 2012, CA final Auditing paper -

Q.2 C) Mr. A has been appointed as a statutory auditor of PVT.ltd company where his spouses's sister's hasband is having 75% ownership?

reply what is the ans of this question whether he is of professional misconduct or not.?

pls reply soon......

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2 Replies

CA.Sahil Shah (C.A.) (26 Points)
Replied 25 November 2012

The meaning of "Relative" to Clause 4 of part I of Second Schedule has been clarified by ICAI as the same meaning as mentioned in AS 18.

As per the AS-18, relative means spouse, son, daughter, brother, sister, father and mother.

Therefore its not a professional misconduct.

(Source: ANNOUNCEMENT No. ICAI/ESB//2011/02 All the members of the Institute of Chartered Accountants of India (ICAI) are hereby informed that in terms of its decision taken at the 299th Meeting of the Council held on 27th – 28th October, 2010, it has been decided that the term “relative” for the purpose of Chapter-IV of Council General Guidelines, 2008 (Opinion on Financial Statements when there is substantial interest) will have the same meaning as assigned to it in AS-18. Accordingly, the Chapter IV of the Council General Guidelines, 2008 as appended to the ICAI publication titled “The Chartered Accountants Act, 1949 “ is modified and modified version shall read as under - “Chapter IV - Opinion on financial statements when there is substantial interest 4.0 A member of the Institute shall not express his opinion on financial statements of any business or enterprise in which one or more persons who are his “relatives” within the meaning of Accounting Standard (AS - 18) has / have, either by themselves or in conjunction with such member, a substantial interest in the said business or enterprise. Explanation: For this purpose and for the purpose of compliance of Clause (4) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, the expression “substantial interest” shall have the same meaning as is assigned thereto under Appendix (9) to the Chartered Accountants Regulations, 1988. “ This decision shall be in force with effect from 28th June, 2011 )