The document summarizes key provisions relating to the duties and powers of auditors under Section 143 of the Companies Act 2013 in India. It discusses the following in 3 sentences or less: - Section 143(1) outlines matters auditors must inquire into including loans/advances, personal expenses, asset sales, and share issuances. - Section 143(2) requires auditors to report on accounts examined and compliance with accounting standards in reports to the company. - Sections 143(3) and 143(4) specify the contents of audit reports, including compliance with laws and standards, transactions, director qualifications, and reasons for qualifications.

1. Technical Session-II:
Provisions relating to Duties & Powers of
Auditors under Section 143 of the
CompaniesAct2013
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By MVSK RUTHVIK

2. 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.
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3. Who is an Auditor
• Auditors are independent accounting/auditing firms
that are hired by companies subject to an audit.
• 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.-modify the auditor
definition as per sec 139
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4. Duties of Auditors
• Introduction-
– Sec 143 of the companies act, 2013 speaks about
the powers and duties of the auditors which were
earlier mentioned in the Sec 227,228 of the
companies act 1956.
– There are about 15 clauses under section 143.
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5. Section 143(1)-Duty to Inquire
• This section focuses the areas where the auditor is
required to inquire into the following matters-
– loan and advances made by the company the basis of
security
– are properly secured
– and the terms and conditions on which it is made are
prejudicial to the interest of the company or its
members.
• Loans and advances made by the company are shown
as deposits
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6. • Whether personal expenses have been charged to
revenue account.
• Company other than banking company/ investment
company
– so much of the assets of the company consists of
share , debentures or other securities
– have been sold at a price less than the price at which
these securities are purchased by the company.
• In case of shares, issued in cash
– whether the cash in respect of these shares have
actually been received or not and
– in case the cash is not received then whether it is
clearly shown in the books of accounts or not.
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7. • Transactions of the company are represented merely by
books entries are prejudicial to the interest of the
company
• Opinion of the Research Committee of the Institute of
Chartered Accountants of India on section 143(1) is
– The auditor is not required to report on the matters
specified in sub-section (1) 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, he has no
further duty to report that he is so satisfied.
– In such a case, the content of the Auditor’s Report will
remain exactly the same as the auditor has to inquire
and apply his mind to the information obtained by the
enquiry, in deciding whether or not any reference needs
to be made in his report.
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8. 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.
– The report shall be given after taking into
consideration the provisions of this act,
accounting standards, auditing standards etc
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9. Section 143(3)-Contents of Auditors Report
• Obtain all the information and explanations which to the best of
his knowledge and belief were necessary for the purpose of
audit.
– In case proper information are not received , then the details
which are missing and effect of such information on the
financial statement should be stated in the auditor’s report.
• Proper books of accounts as required by law are
maintained or not and whether proper returns
adequate for the purpose of audit have been received
from the branch auditor in case of company auditor &
branch auditor are not same.
• Companies balance sheet & profit and loss account are
in agreement with the books of accounts and returns
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10. Continued….
• Financial statement prepared by the company
comply with the accounting standards issued by ICAI.
• Observations and comments of the auditor on the
financial transactions or matters which have adverse
effect on the company.
• Whether any director is disqualified to be appointed
as a director under section 164(2).
• Whether the company has adequate internal
financial control system in place and operative
effectiveness of such control.
• the company has disclosed the impact of any
pending litigation if any in the financial statement.
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11. Continued….
• company has made provision in respect of any
material foreseeable losses as required by law or
accounting standards including the derivative
contracts.
• company has made delay in transferring the amount
required to be transferred to the Investor Education
and Protection Fund (IEPF) by the company.
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12. Section 143(4)
• Where any of the matters required being
included in the audit report under this section
is answered in negative or with a qualification,
then in that case auditor is required to state
the reasons of such reservations and negative
remark.
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13. Section 143(5)
• Government Company-
– C&AG will appoint the auditor to conduct the audit of
the company.
– It gives the directions and the manner in which the
accounts of the government company are required to be
audited by the auditor.
– After completing the audit, auditor will issue an audit
report to the C&AG which will include all the matters.
– In additions to these matters, the auditor of the
government company shall state in his audit report the
• direction issued by C&AG ,
• the actions taken there upon and
• the its impact on the accounts and financial statement of
the company.
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14. Section 143(6)
• On receipt of audit report of the government
company,
– C&AG can carry out supplementary audit with 60
days from the date of receipt of such audit report
– He may comment upon the audit report.
– Audit report should be sent to every person to
whom audited financial statement are sent & the
copy of audit report shall also be place at the
AGM.
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15. Section 143(7)
• In case of a Government company
– C&AG in respect of a financial year shall appoint
an auditor duly qualified to be appointed as an
auditor of company within a period of 180 days
from the commencement of the financial year,
who shall hold office till the conclusion of the
annual general meeting.
• In case C&AG feels necessary, he may conduct the
test audit of the company.
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16. Section 143(8)
• In case has company Branch audit, who has a Branch in
India,
– the audit of such branch can be done by the Company
auditor or
– by any other person qualified to be appointed as an
auditor as per Sec 139.
• In case the company has a Branch is in some other
countries,
– then the audit of such branch shall be conducted by
an accountant or by any such person qualified to be
appointed as an auditor as per the laws of that
country.
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17. Continued….
– Such branch auditor should prepare a report
on the books of accounts of the branch audited
by him and send a copy of such audit report to
the company auditor.
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18. Section 143(9)
• Auditor shall comply with the standards on
auditing(SA) during his course of audit.
• Any deviation from the SA’s should be explained with
reasons as to why he opted should be made clear.
• He should refer the Guidance notes and 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.
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19. Section 143(10)
• The Central Government may prescribe the standards of auditing,
as recommended by the Institute of Chartered Accountants of
India, in consultation with and after examination of the
recommendations made by the National Financial Reporting
Authority.
• Until such standards are notified, the standards which are issued
by the ICAI Shall be deemed to be the auditing standards for the
purposeofaudit
• 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
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20. Section 143(11)
• The Central Government may in consultation with the
National Financial Reporting Authority direct that the
audit report in case of specific class of companies shall
include a statement on such matters as may be
specified therein.
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21. Section 143(12)-Reporting on Fraud
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22. • Auditor of the company in the course of performance of
his duties as 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
– then the auditor should immediately report the matter to the
central government within such time and in such manner as
may be prescribed.
• The auditor should forward his report to the board or
the audit committee as the case may be immediately
after he comes to know about the fraud seeking their
reply or observations within 45 days.
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23. Continued……
• On receipt on such reply or observations of the board or the
audit committee,
– the auditor should forward his report along with the reply or
observations of the board or the audit committee and
– his comments on such reply or observations to the central
government within 15 days.
• In case, no reply or observations has been received by the
auditor from the board or the audit committee, then the
auditor should 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.
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24. Section 143(13)
• However, auditor will not considered as guilty
of professional misconduct if he does his duty
In good faith.
– Example 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.
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25. Note:-
• It is important note that Only frauds against
company by officers/employees to be reported
Frauds committed by the company (on
outsiders/creditors/investors etc) are outside the
scope of reporting requirements under section
143(12).
• If auditor reports frauds committed by the
company, he cannot avail the immunity under
section 143(13) and would be liable for
professional misconduct for breach of
confidentiality under clause (1) of Part I of the
Second Schedule to the CA Act, 1949.
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26. Section 143(14)
• This section shall apply to the
– cost auditor conducting cost audit and
– the company secretary doing secretarial audit
• Secretarial audit has been introduced newly in
companies act 2013. It is a process to check
compliances made by the Company under Corporate
Law & other laws, rules, regulations, procedures etc.
It is a mechanism to monitor compliance with the
requirements of stated laws and processes.
.
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27. • If a secretarial auditor, has reason to believe
that an offence involving fraud is being or has
been committed
– against the company by officers or employees of
the company,
– he shall immediately report the matter to the
Central Government within such time and in such
manner as may be prescribed
– Failure to do so shall attract a fine which shall not
be less than 1 lakh rupees but which may extend
to 25 lakh rupees.
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28. Section 143(15)-Penalties fornoncompliance
• If the
– Chartered accountant, company secretary or the
cost auditor
– do not comply with any of the provisions of this act
then he will be punishable with a fine which shall
not be less than Rs. 1 lakh but which can be extend
to Rs. 25 lakhs.
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29. Enough of Lecture….
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Lets have humour

30. • Banner in front of the Institute of Chartered
Accountants of India …. “Drive slowly, don’t
kill our students….. leave them to us……”
• Are you-
– Emotionally Numb?
– Romantically Starved?
– Creatively Challenged?
– Artistically Void?
– Socially Outcast?
–Congratulations You are a CA
Student!!!!!!!!!!!!
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31. • AUDITOR
– A-accounting and others
– U-underlying
– D-data and
– I-information
– T-to give an
– O-opinion in
– R-the audit report
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32. Irritating audits, Fighting on stupid issues,
Everyday classes, unknown Office Hours
More expenditure, Less stipend,
People call it ARTICLESHIP, We call it LIFE.
• Nevertheless ………………………………….. We got
to be Proud of something…………………..
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33. • 5 Years
• 50 Laws
• 500 Lectures
• 5,000 Hours of Office Work
• 50,000 Sections
• 5,00,000 Rules
• A normal human being can’t bear it.
• The remaining are called
• CHARTERED ACCOUNTANTS…………………..
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