before appoinment, an auditor owes to a company more than rs.1000 and he clear

before appoinment, an auditor owes to a company more than
rs.1000 and he clears his debt before appointment.he is due
to company upto 30-06-06.he is give his report between 01-
04-06 to 31-03-07.what is the duty of the auditor while
reporting on the transactios occured in his due period

Question Posted / vishnu.reddy939@gmail.com

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before appoinment, an auditor owes to a company more than rs.1000 and he clears his debt before ap..

Answer / chalapathi rao govada

AS per Sec 226 of companies Act 1956,if any person who owes
to the company for a sum more than Rs1000 he is not
eligible to appoint as a auditor of such organisation.

So Sec 226 is not specify the Material date for deciding
the debtness.

But if you interpert the terminology used in Sec 226 it is
very clear that the date when proposal to appoint any
person as auditor has high significance.

It means when Auditor is proposed to be appoit as statutory
auditor is material date for deciding the validity of
appointment.

In the given case it is very clear that the individual is
owed to company more than 1000 which is repaid before
appointment.So on the date of proposal to appoint as a
auditor he is indebted to company.So he is not at all
eligible to appoint as a auditor for that organisatin.

In additin to this he is going to report if appointed for
the period which includes his indebtness.

So he is not eligible to appoint as auditor for such
company as per the provisions of Sec 226(2) of the
companies act.

You can aslo refer to the ICAI clarifications to this
extent.

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