Statutory auditor can be appointed as an internal auditor after rotation!
Section 144 of the Companies Act 2013 on 'Auditor not to render certain services' is another valiant idea precisely introduced in the Act which, in apparent language, has chosen to list out specific and certain services whether such services are rendered in a legitimate way or in a indirect way to the organization or its holding company or subsidiary company.
There is no noticeable proportional section under the Companies Act 1956 to direct the above restrictive services. Be that as it may, the Chartered Accountant Regulation Act & revised Guidance Note on Independence of Auditors introduced by the Council of the Institute of Chartered Accountants of India have guided the Auditors in regard to the acknowledgement or in any case of specific or certain services other than audit that are managed with in the article.
With respect to, the heading of the Section on obtaining services other than the restricted ones; pointed attention is welcomed especially to the main para of Section 144 which is quoted verbatim below:
Eligibility Criteria for Appointment of Internal Auditor
An auditor appointed under this Act will provide to the company only such other services as are endorsed by the Board of Directors or the review panel, all the things considered, but which will exclude any of the following services (regardless of whether such services are rendered directly or indirectly to the organization or its holding company or subsidiary company, namely:-
A plain reading of the above unmistakably explain in unambiguous language that considerably other acceptable services to be rendered by an auditor are to be endorsed by the Board of Directors or the audit committee. This must to be noted both by the auditors and auditees coming under the Act.
The purpose behind this article is to deliver and address the question with regards to whether a CA firm can be appointed as an internal auditor after he stops to be an auditor after retirement on rotation?
In the light of the abovementioned, after retirement, the firm who was designated as the statutory auditors seem, by all accounts, to be qualified to be selected as Internal Auditors for the same organization.
Right now, it is suitable to refer Clause 32 of Standard on Quality Control that runs as follows.
Auditors are to be totally clear about their eligibility for appointment of auditors of an audit. Section 141 and Section 144 of the Act, the relevant provisions of SQCI, the Code of Ethics and guidance Note ought to all things considered large speak in one voice except where it's for general compliance. Auditing community should not be in pell-mell for need of clearness about specific issues that are addressed in the article.
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