Mr. Dharam has been appointed as the statutory auditor of Great Ltd., a listed company. As per the terms of acceptance of audit, the whole audit fee…

As per Chapter X of Council General Guidelines, 2008 a member of the Institute in practice or a partner of a firm in practice or a firm shall not accept appointment as auditor of a concern while indebted to the concern or given any guarantee or provided any security in connection with the indebtedness of any third person to the concern, for limits fixed in the statute and in other cases for amount exceeding - 1,00,000/-. Under section 141 (3) of the Companies Act, 2013 along with Rule 10 of the Companies (Audit and Auditors) Rules, 2014, a person shall be disqualified to be appointed as auditor if he or his relative or his partner is indebted in excess of rupees five lakh to the company or its subsidiary or its holding company or its associate company or a subsidiary of such holding company. However, the Research Committee of the ICAI has expressed the opinion that where in accordance with the terms of engagement of auditor by a client, the auditor recovers his fees on a progressive basis as and when a part of the work is done without waiting for the completion of the whole job, he cannot be said to be indebted to the company at any stage. Conclusion: In the instant case, Mr. Dharam is appointed to conduct statutory audit of Great Ltd., a listed entity and it was decided in the terms of acceptance of audit, that the whole audit fee shall be payable in four installments of 1.5 lakh each and shall be paid after every limited review done on quarterly basis and conclusion of audit committee meeting every quarter. He has received the audit fees of 1.5 lakh in respect of two quarters, but for third and fourth quarter the payment of fees was received on March 21st, 2025, for the year ended 31.3.2025 which is on progressive basis. Therefore, Mr. Dharam will not be held guilty of misconduct.