Many CA firms including big Firms may lose audit of Companies providing utility service providers & other companies due to the certain new impractical disqualifications inserted in the new Companies Act. Sec 141(3) of the Companies Act, 2013 states that the following persons shall not be eligible for appointment as an auditor of a company, namely:
Ø a person or a firm who, whether directly or indirectly, has business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company of such nature as may be prescribed;
COMMENTS: The expression “business relationship” has not been defined. CA Firms receives utility services such as electricity, telephones etc from their clients at their head office, branches and homes. They also receive services relating to hotels, insurance, hospitals, banking etc.
1) A question will arise, “Can they continue as auditor of those Companies after receiving any such service?
2) A CA cannot engage himself in any other business. Then, why such IMPRACTICAL disqualification has been brought in the statute?
3) What the Govt. intends to achieve by bringing such disqualifications even without any monetary limit?
4) Why the expression “indirect” has been used above?
1. It is suggested that the expression “business relationship” should be defined.
2. Utility services should be excluded from the definition of business connection.
3. A monetary ceiling should be provided for “business connection”.