engagement as internal auditor as well statutory auditor

[CA Mukesh Agrawal]

Dear sir

My query is whether a CA firm which are a statutory auditor of a
susbsidiary company be the Internal auditor of a hodling company ?

thank in advance

CA Mukesh Agrwal
Lucknow

[CA. Harsh Jain]

As far as my knowledge goes, this cannot happen bcoz, Auditor's Independence may be lost in the process.

So both Internal & Statutory Auditors should be different.

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Thanks & Regards
CA. Harsh Jain  M.Com., A.C.A.
Harsh Jain & Co.
Chartered Accountants
Kharagpur (W.B.)
Conatct : ( 03222 ) 253 450

              (+91) 99323-31587
E-Mail : jainh...@icai.org

Website : http://harshjainco.icai.org.in

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[Krishna Moorthy K]

In my opinion, it is possible for a statutory auditor of a subsidiary company to carry out the internal audit work of the holding company since both the companies have separate legal entities. By doing so, the independence of the auditor is not lost particularly because the statutory auditor of the holding company is a different firm whom the internal auditor has to satisfy that there is an adequate internal audit system commensurate to the size of the company.    This way, there will always be  a check on the quality of internal audit done.  I do not find any relevant provisions of the Companies Act, 1956 which prevents a statutory auditor of a subsidiary company carrying out the internal audit work of the holding company.   I am also sure that there may not be any circular from the Institute of Chartered Accountants restricting the above.    But the statutory auditor of any company cannot accept the internal audit work of the same company as clarified by the erstwhile Department of Company Affairs vide their circular no.29/76 dated 27-8/1976 as corrected by 5/77 dated 8/4/1977.

 

I seek the views of fellow professionals on my above view.

 

With warm regards,

 

CS. K. Krishnamoorthy

Bangaore-560001

9980744334

[avik raha]

Hi,

Due to conflict of interest , Statutory auditor of a Subsidiary Company can't be the Internal Auditor of the Holding Company. As the Parent Co. holds the control over the subsidiary company, so being statutory auditor of the Subsidiary, a CA firm can't act as the Internal auditor of the earlier. It affects the Independence of the Internal auditor. 

Warm Regards,

CA Avik Raha <avik....@gmail.com>
B.Com.(H), ACA, DFA 
Associate Consultant, FS - Advisory Services

Ernst & Young, Mumbai

Date : 23th Nov 2011

On Mon, Nov 21, 2011 at 3:29 PM, CA Mukesh Agrawal <mukes...@gmail.com> wrote:

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