RESPONSIBILITYOF

AUDITORS UNDER
COMPANIES ACT 2013

S RIN IVA S M E T H U K U
 Topics of Discussion
• Brief about Companies Act 2013
• Provisions Relating to Auditors
• Duties & Powers of Auditors- Section 143
• Some Humour
• Conclusion
Brief About Companies Act 2013
• Companies Act 2013 has bought a lot of
revolutionary changes relating to appointment,
disqualification, many other new terms of
auditor.
• Penalties are something which got a special
status and makes a auditor go bankrupt.
• The 3’S behind CA 2013 to come into
enforcement
• Satyam Computers
• Saradha Scam
• Sahara Scam
PROVISIONS RELATING TO
AUDITORS
Provisions Governing Auditors
Companies Section Description
Act, 2013
Section 139 Appointment of Auditors
Section 140 Removal, Resignation of auditor and giving of special notice.
Section 141 Eligibility, qualifications and disqualifications of auditors.
Section 142 Remuneration of auditors.
Section 143 Powers and duties of auditors and auditing standards.
Section 144 Auditor not to render certain services.
Section 145 Auditors to sign audit reports, etc.
Section 146 Auditors to attend general meeting.
Section 147 Punishment for contravention.
Section 148 Central Government to specify audit of items of cost in respect
of certain companies. (Cost Audit)
Sec 139- App of Auditor Rotation of Auditors Cooling Period

Removal & Resignation Qualifications & Remuneration

Dis-Qualifications
Audit Overview
Auditing refers
to a systematic examination of
books of accounts, documents and
vouchers
to ascertain how far the financial
statements present a true and fair
view of the concern.
compliance i.e. ensuring that the
books of accounts are properly
maintained by the entity as required
by law.
Who is an Auditor
• Independent accounting / auditing firms
hired by companies subject to an audit as
per Companies Act 2013.
• External auditors express their own
opinions on whether the financial
statements of the company in question
are free of material misstatements
• Experts who possess knowledge in the
field Auditing, Assurance & taxation who
fall within the definition of Chartered
accountants act, 1949.
Powers & Duties of Auditor- Section 143
Section 143(1)-Duty to Inquire
• Auditor has to right to inspect Books of
accounts, Vouchers at all times relating to
company irrespective of the location.
• Seek Information from the officers &
explanation in relevant matters which he
feels so.
Areas of Special Focus
1. Loans & Advances 5. Personal Expenses charged
2. Verify any Fictitious Entries to revenue
3. Sale of Investments not less 6. Issue of shares for
than Book Value. Consideration or in Kind
4. Loans & Advances Shown as
Deposits
Reporting Requirement
• Opinion of the Research Committee of ICAI on
section 143(1) is that auditor r is not required to
report on the matters specified unless he has
any special comments to make on any of the
items referred to therein.
• If he is satisfied as a result of the inquiries,
there is no duty to report.
Section 143(2)-Duty to Report
The auditor should report to the company
• on the accounts examined by him and
• in respect of the financial statement that
are required to be laid before the company
in general meeting.
• Report whether the company has complied
with the accounting standards, auditing
standards which depict true & fair view of
status of affairs of the company through
its financial statements.
Section 143(3)-Contents of Auditors
Report
The auditor should report to the
company on following Matters:-
1. Reporting the impact on
financial statement relating to the
information/explanations not
provided by the management.
2.Evidence to believe proper
books of accounts maintained in
Branch as per the branch auditor’s
report.
3.Tallying of Profit & Loss
Account, Balance Sheet to the
Books of accounts maintained by
the company.
Continued…..
5. Observations and comments of the
auditor on the financial transactions
or matters which have adverse
effect on the company
6. Report whether any director is dis-
qualified from being appointed as
the director under section 164(2).
7. Whether Adequate Internal Finance
Controls have placed & operating
effectiveness of such controls.
8. Disclosing the impact of any
pending litigation, if any in the
financial statement.
9. Delay in transferring the amount to
the Investor Education and
Protection Fund (IEPF) by the
company.
Section 143(4)- Qualified Report by
Auditor
• Any areas which the auditor feels that has
an inadequacy or negative information, he
should disclose the same in his report
stating the reasons of such reservation &
negative report.

Section 143(5)- Government Company

Auditor
• Govt Company auditors shall be appointed
by CAG who may direct the auditor the
manner in which the auditor may be
conducted.
• Report the impact on financial statements in
account of directions followed by the
auditors as the per CAG.
Section 143(6)- CAG Supplementary Audit
• On Receipt of Audit Report from the
auditor-
• CAG may comment upon the audit
report (or) conduct a supplementary
audit by authorizing persons on their
behalf within 60 days of receipt of Audit
report, if it so feels.
• However the report of such
supplementary audit has to shared to all
persons to whomsoever the audited
financials have been shared.
• Such copy should also been placed in the
AGM.
Section 143(7)- CAG Test Audit
• In case of Government Companies, CAG
shall appoint the auditor within 6 months
from commencement of FY who holds
office till Conclusion of AGM.
• In case of such appointed auditors. CAG
may conduct the test audit.
• Such test report will attract provisions of
Section 19A of CAG Act, 1971.
Section 143(8)- Branch Audit
Company has Branch in India Company has Branch outside
1. Audited shall be performed India
by Company Auditor 1. Audited shall be performed an
2. Any other qualified Person Accountant.
u/s 139 of act.
2. Any other person
qualified who is qualified
to perform such audit
Such branch auditor should
prepare a report on the books of
accounts of the branch audited by
him & send a copy of such audit
report to the company auditor.
Section 143(9)- Compliance of AS
• Compliance of Standards on Auditing
(SA) has been made Mandatory.

• Any deviation should be explained

with reasons as to why auditor opted
should be made clear.

• Reference to Guidance notes & other

materials released by ICAI from time
to time and seek help from the fellow
members of ICAI on certain aspects
where he is unable to form a opinion.
Section 143(10)- National Financial Reporting
Authority
• Central Government may prescribe the SA
recommended by ICAI in consultation with & after
examination of the recommendations made by the
NFRA.

• NFRA is regulatory authority for auditing,

accounting and financial reporting, to advice on
matters related to Auditing Standards in addition
to Accounting Standards and also to act as a
regulatory body for accountancy profession

• Until such standards are notified, the standards

which are issued by the ICAI Shall be deemed to be
the auditing standards for the purpose of audit.
Section 143(11)- Reporting in Auditor’s Report
• The Central Government may in
consultation with the NFRA direct that the
audit report in case of specific class of
companies shall include a statement on
such matters as may be specified therein.
Section 143(12)-Reporting on Fraud
Section 143(12)-Reporting on Fraud
• Auditor has reason to believe
• that an offence involving fraud is being
or has been committed
• against the company by an officer or the
employee of the company
• Reporting the matter immediately to
the central government if such fraud
amounts to Rs. 1 Crore or above.

• The auditor should first intimate the

board of directors or the audit committee
immediately within 2 days of knowing
about the fraud seeking their reply/
observations within 45 days.
Continued….
• On receipt on such reply or observations
of the board or the audit committee,
• Forwards the report along with the reply
or observations of the board or the audit
committee and
• Auditor’s comments on such reply or
observations to the central government
within 15 days.

• In case, no reply received,

• Send the audit report along with a note
containing the details of his report that
was earlier forwarded to the board or
the committee for which he has failed to
receive any comments or observations.
Section 143(13)- Reporting in Good Faith
• However, auditor will not considered
as guilty of professional misconduct if
he does his duty In good faith.

• However, the duty of confidentiality

will not be effected in case auditor
reports such matters to central govt
in good faith as per second schedule
of the Chartered Accountants Act,
1949.
Section 143(14)- Applicability to CS & CMA
The provisions of Section 143 shall be
equally applicable to-

• Company Secretary in practice

conducting secretarial audit u/ 204
(or)
• Cost Accountant performing cost
audit u/s 148.

• Section 148 governing Cost Audit

mentions about the same.
Section 143(15)- Penalties for Non-Compliance
Any Non-Compliance with any provisions
of the Section 143-

• Chartered accountant, company

secretary or the cost auditor
• Shall be punishable with a fine which
shall not be less than Rs. 1 lakh but
which can be extend to Rs. 25 lakhs.