Q14 b, 21 c

Sir they have included guidance note on independence in their answer. They have not included any section of Companies Act. Answers in PM are not understandible. What to do

7 answers


Staff 7 days ago

Question 14(b) — Requirements of Sec 141 (3) are applicable to Statutory Auditors and not to tax consultants. Reference to guidance note on independence was not required. to be on safer side you can always give reference to guidance note on independence in cases where protection of independence is objective.
 Question 21(c)– This answer is again inappropriate. Office is on rent from client so it is business relationship hence disqualified. further if it is only for personal purpose then discount generally doesn’t matter but guidance note on independence says that ca should go beyond rules and regulations and see if Independence is affected and if yes then dont accept assignments.
many of disqualifications are to keep auditor independent so that he is not legally , financially , professionally dependent on client.
you will find some questions as weird as answers are framed by different people at different point of time. try to take positive points from them. like in these questions we can learn that reference to guidance note on Independence can be good scoring point


Sir if only residence was taken on rent then he will not b disqualified?


In Q21 giving discount can be assumed not at arm’s length price


In Rule wrt business relationships what is such other similar businesses.


Pg 2.58 of ur book. I have send image in this regard via WhatsApp.

Staff 6 days ago

if its only for residence it is personal purpose transaction so business relationship not applicable. he needs to take care that indebtedness should not exceed 5,00,000. At the end in such scenario you should write that as per company act it is not disqualified. but auditor should evaluate as per guidance note on independence that it should not affect his ability to do audit. if it is affecting then dont accept such assignment
Arms Length + Ordinary Course of Business + H(2)AT industries all these 3 conditions are cumulative to gain exemption from business relationship. if its for residence , that is for personal purpose it is straight away not business relationship, no need to see these 3 cumulative conditons
other similar business, is same as explained in video
hotel— restaurant / cafe
hospital — clinic / pathalogy
airlines — helicopter
telecom– broadband  etc 


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