Auditor's Powers, Duties, and Liabilities under the Companies Act, 2013

Introduction 

The office of the statutory auditor is central to the corporate governance framework under the Companies Act, 2013. Sections 143 to 147 collectively define the rights, obligations, and liabilities of auditors appointed under the Act, ensuring they function as independent watchdogs of corporate financial integrity. These provisions empower auditors with broad access to company records, bind them with statutory reporting duties, and subject them to meaningful penalties for non-compliance or fraud. 

Section 143 — Powers and Duties of Auditors 

• Every auditor has an unconditional right of access at all times to the books of account and vouchers of the company, whether maintained at the registered office or elsewhere, and may require such information and explanation from officers as he considers necessary. 
• Among the specific matters the auditor must inquire into are: whether loans and advances are properly secured and not prejudicial to the company; whether book-entry transactions are prejudicial to its interests; whether securities have been sold below purchase price; whether loans are disguised as deposits; whether personal expenses are charged to revenue; and whether cash has actually been received against shares allotted for cash. The auditor of a holding company also has access to the records of its subsidiaries and associate companies for consolidation purposes. 
• The auditor's report to members must state whether the accounts give a true and fair view of the company's financial affairs. It must additionally address: whether all necessary information was obtained; whether proper books of account have been maintained; whether financial statements comply with accounting standards; any adverse observations on financial transactions; whether any director is disqualified under Section 164(2); and whether the company has adequate internal financial controls and their operating effectiveness. 
• In respect of Government companies, the CAG appoints the auditor, may conduct a supplementary audit within sixty days of receiving the audit report, and may comment upon or supplement it — such comments being placed before the Annual General Meeting alongside the original report. 
• Where a branch office exists, its accounts are audited by the company's auditor or another qualified person; for overseas branches, by a person qualified under the laws of that country. The branch auditor submits his report to the company's auditor for incorporation into the main audit report. 
• Every auditor must comply with auditing standards prescribed by the Central Government on the recommendation of the ICAI and in consultation with the NFRA. Until formal notification, ICAI standards apply. 
• If an auditor has reason to believe that a fraud of a prescribed amount is being or has been committed by officers or employees, he must report it to the Central Government. For smaller frauds, the report goes to the Audit Committee or the Board, with disclosure mandated in the Board's Report. Good-faith reporting attracts no liability. Failure to report carries a penalty of ₹5 lakh for listed companies and ₹1 lakh for others. These provisions apply mutatis mutandis to cost accountants under Section 148 and company secretaries in practice under Section 204. 

Section 144 — Prohibited Services 

An auditor may provide non-audit services only with Board or Audit Committee approval, but the following are absolutely prohibited — whether rendered directly or indirectly to the company, its holding company, or subsidiary: 

• Accounting and book keeping services 
• Internal audit 
• Design and implementation of any financial information system 
• Actuarial services 
• Investment advisory or banking services 
• Outsourced financial services 
• Management services 
• Any other services as may be prescribed 

Section 145 — Signing of Audit Reports 

• The auditor must sign the audit report and certify other company documents in accordance with Section 141(2). Any qualifications or adverse observations contained in the report must be read before the company in general meeting and are open to inspection by any member. 

Section 146 — Attendance at General Meetings 

• All notices and communications relating to general meetings must be forwarded to the auditor. Unless exempted, the auditor must attend — personally or through a qualified authorised representative — and has the right to be heard on any matter concerning him as auditor. 

Section 147 — Punishment for Contravention 

• For contravention of Sections 139 to 146, the company is liable to a fine between ₹25,000 and ₹5 lakh, and every defaulting officer to a fine between ₹10,000 and ₹1 lakh. 
• An auditor contravening Sections 139, 143, 144, or 145 faces a fine between ₹25,000 and ₹5 lakh, or four times his remuneration, whichever is less. Where contravention is knowing or wilful with intent to deceive, the auditor is liable to imprisonment up to one year and a fine between ₹50,000 and ₹25 lakh, or eight times his remuneration, whichever is less. Upon conviction, the auditor must refund his remuneration and pay damages to the company, statutory bodies, or members and creditors for losses arising from incorrect or misleading audit statements.  
• Where partners of an audit firm have acted fraudulently or colluded in fraud, both the firm and the concerned partners are jointly and severally liable. 

Conclusion 

Sections 143 to 147 form the statutory backbone of auditor regulation under the Companies Act, 2013. By vesting auditors with wide-ranging access and inquiry powers, mandating comprehensive reporting, prohibiting conflicting non-audit services, and prescribing graduated penalties, these provisions ensure that the statutory audit remains a meaningful instrument of corporate accountability — one that safeguards the interests of shareholders, creditors, and the public alike.