J is a Practicing Company Secretary. He had taken a personal loan of ₹75,00,000 from LKP Ltd. He has used such loan towards purchase of his house which has been mortgaged with LKP Ltd. Due to some financial crisis, J has

According to CSAS-1 Auditing Standard on Audit Engagement, the Auditor shall not have any substantial conflict of interest with the Auditee. Substantial Conflict of interest means: Holding of more than 2% in the paid up share capital or shares of nominal value of rupees fifty thousand, whichever is lower or more than 2% voting power, as the case may be, by the Auditor singly or along with partners, spouse, parent, sibling, and child of such person or of the spouse, any of whom is dependent financially on such person. Indebtedness of the Auditor for an amount exceeding rupees five lakh other than that arising out of ordinary course of business of the Auditee: Provided that any indebtedness that may seriously impair his independence shall also be considered as substantial conflict of interest. Where an Auditor was in employment of the Auditee, its holding or subsidiary company and 2 (two) years have not lapsed from the date of cessation of employment, the same shall be considered as substantial conflict of interest. Conclusion: The circumstances of the case suggest that indebtedness of J towards LKP Ltd. is such that, if he accepts the Audit of LKP Ltd., it may substantially impair the independence of J while forming an opinion on the basis of his audit findings and therefore considered as substantial conflict of interest. Therefore, in this case, J shall be debarred from accepting the Secretarial Audit assignment of LKP Ltd.