If any director is disqualified from being appointed under section 274(1) (g) the auditor should mention this fact in his audit report. For this purpose how does he determine their eligibility :
|a) He obtains a representation from each director|
b) He obtains a management representation
c) He enquiries from Registrar of Companies
d) Any one of the above
The Correct Answer Is:
a) He obtains a representation from each director
Correct Answer Explanation: a) He obtains a representation from each director
Section 274(1)(g) of company law deals with disqualification for appointment of directors. When an auditor needs to determine the eligibility of directors as per this section and ascertain if any director is disqualified, obtaining a representation from each director is the correct approach.
Why is obtaining a representation from each director the correct answer?
Auditors are tasked with various responsibilities, and one crucial aspect involves ensuring compliance with legal requirements related to the appointment of directors. When a director’s disqualification under section 274(1)(g) is in question, the auditor must gather information directly from the concerned individuals— the directors themselves.
This direct communication allows the auditor to verify their eligibility status and whether any disqualifications are applicable to them as per the stipulations of the law.
By obtaining a representation from each director, the auditor ensures a first-hand, specific confirmation regarding their eligibility status.
This representation includes declarations and disclosures from the directors regarding any disqualifications they might have under section 274(1)(g). It is a crucial step in validating the compliance status and forms an integral part of the audit process.
Why are the other options not correct?
a) He obtains a management representation:
While obtaining a management representation is an essential aspect of an audit, in this context, relying solely on management might not suffice. Directors themselves are directly responsible for their qualifications and eligibility.
Depending solely on management might lead to potential conflicts of interest or misinformation, as management may not have comprehensive knowledge of individual disqualifications of directors under this specific section of the law.
b) He enquires from the Registrar of Companies:
While the Registrar of Companies holds essential information about company filings and directorships, relying solely on this source may not be appropriate in determining individual disqualifications of directors.
The registrar might not have updated or specific information about the disqualification status of each director under section 274(1)(g) at all times. Additionally, the responsibility primarily lies with the directors themselves to disclose any disqualifications they might have.
c) Any one of the above:
This option seems to generalize the approach, but in the context of verifying director disqualifications under section 274(1)(g), a generalized approach might not yield accurate results. Each option carries its own limitations, and none singularly ensures direct confirmation from the directors themselves, which is crucial in this scenario.
In conclusion, the importance of obtaining a representation from each director in determining their eligibility, especially regarding potential disqualifications under section 274(1)(g), cannot be overstated.
This direct communication allows the auditor to fulfill their responsibilities diligently and ensures compliance with legal requirements, contributing to the integrity and transparency of the audit process.
To summarize, obtaining a representation from each director stands as the most reliable approach for auditors to directly confirm and validate the eligibility status of directors, particularly regarding disqualifications under section 274(1)(g), ensuring a meticulous and accurate audit process.
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