Appointment of - Whether branch audits of Indian companies and audit of Indian business accounts of foreign companies are to be included while calculating specified number in terms of Explanation I to sub‑sections (1B) and (1C) - Companies Law - Circular : No. 21/75

Circular : No. 21/75 [35/3/75 ‑ CL ‑ III], dated 24 ‑ 9 ‑ 1975. Subject:- Appointment of - Whether branch audits of Indian companies and audit of Indian business accounts of foreign companies are to be included while calculating specified number in terms of Explanation I to sub ‑ sections (1B) and (1C) A question has been raised as to whether the auditors of the branches of the Indian companies and the audits of the Indian business accounts of the foreign companies which have established places of business in India and are doing business in India are to be taken into account while calculating the specified limit on the number of audits as laid down in Explanation I to sub‑section (1C) of section 224. The question has been examined in detail and this Department is of the view that the branch auditor of the Indian companies appointed under section 228 audits the accounts of the particular branch only for which he is appointed and forwards his report to the auditor appointed under section 224 and, hence, he cannot be equated with the company auditor appointed under section 224 who has to report to the annual general meeting on the accounts of the company as a whole including the branches audited by a branch auditor. The words any part of which appearing in Explanation II cannot have any reference to branch audit which as noted above does not fit into the context of section 224. The said words relate to the antecedent number and not companies insofar as they are of any material significance to the context. Hence, the branch audits are not to be included while calculating the specified number of 20 audits. As regards the audit of the accounts of foreign companies this Department is of the view that foreign companies are outside the scope of section 224 since the definition of the company under section 3 does not include a foreign company. Hence, the audit of the accounts of foreign companies is also not to be included within the specified number of 20 as laid down under Explanation I to sub‑section (1C) of section 224.