ABC Ltd. is engaged in the business of general Insurance and is in existence for over 15
years. The company has a subsidiary company, PIC Ltd., which is also engaged in the business
of insurance other than general insurance.
The previous statutory auditors of PIC Ltd. have completed their tenure as an auditor and
accordingly have resigned and management of PIC Ltd. is looking for new statutory auditors
KB & Associates, a firm of chartered Accountants, have vast experience of audit of insurance
companies and would like to get appointed as auditor of PIC Ltd. KB & Associates is a large
firm and have also employed experts – engineers, valuers, lawyers for various client services.
The firm is evaluating as to what should be the criteria for get appointed as auditors of PIC
Ltd. because in the past, they have audited only the holding companies and considering a
subsidiary company for the first time.
In this context, please help the firm by selecting the correct option.
(a) KB & Associates, a firm of chartered Accountants, should be appointed by the board of
Directors of PIC Ltd. and should ensure that they don’t take up audit of more than 2
insurance companies.
(b) KB & Associates can take up the audit if the firm is appointed by CAG of Indian and should
ensure that they don’t take up audit of more than 3 insurance companies.
(c) KB & Associates cannot take audit of PIC Ltd. because they have employed an expert
which is not permitted by IRDAI Guidelines.
(d) KB & Associates can take up audit of PIC Ltd. by ensuring that they are eligible to be
appointed as per the criteria laid down in the Companies Act 2013 for audit of subsidiary
companies and they would need to submit a certificate in this respect to the ICAI.
Please Answer this MCQ Sir