Sir i have one querry CA P has been appointed as auditor of x ltd. Y ltd is subsidiary of x ltd. Mr. Q is relative of Mr. x is holding Securities in Y ltd face value 85000. whether Mr p is disqualified? what will be the position if Mr Q holding security in Y ltd having Face value of rs 110000?
In exemptions to relatives there is small controversy: – if you read language carefully then as per literal interpretation you will notice that relatives can hold securities only in “that company” and not subsidiaries, associate.
But as per reasonable interpretation if holding is allowed in that company where audit is being conducted other companies such as subsidiaries and associate should be covered.
I will suggest give both the point of views in exams.
If you follow literal interpretation, in above case ca is not disqualified before but in latter case he will be disqualified