Corporate and Economic Laws · Accounts and Audit

Powers, Duties and Reporting of Auditors under Section 143

Updated 11 October 2026 · Fact-checked

Section 143 of the Companies Act, 2013 gives the auditor a right of access to books, vouchers and explanations at all times. It also sets the duties: report to members on true and fair view, state the matters in sub-section (3), and report fraud under sub-section (12). Solve questions by matching facts to the right sub-section.

Understand Powers, Duties and Reporting of Auditors

An auditor is appointed by the members to check the accounts and report back to them. To do this job, the law gives the auditor powers. It also puts duties on the auditor. Section 143 holds most of both.

The power is the right of access at all times to the books of account and vouchers, wherever they are kept. The auditor can also require information and explanation from officers of the company as he considers necessary. The auditor must also inquire into the matters listed in section 143(1), such as whether loans and advances are properly secured, whether personal expenses are charged to revenue, and whether shares said to be allotted for cash were actually paid for in cash.

The duty is to report. Under sub-section (2), the auditor reports to the members on the accounts examined and on every financial statement to be laid before the company in general meeting. The report must say whether, to the best of his information and knowledge, the accounts give a true and fair view of the state of affairs, the profit or loss and the cash flow. Sub-section (3) adds specific matters the report must state, for example whether all information and explanations were obtained, whether proper books were kept, and whether adequate internal financial controls with reference to financial statements exist and operate effectively. Under sub-section (4), any matter answered in the negative or with a qualification needs reasons.

Sub-section (12) deals with fraud. If the auditor has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees, he must report it immediately to the Central Government in the prescribed time and manner. If the fraud involves less than the specified amount, he reports to the audit committee or to the Board instead. Sub-section (13) protects him if he does this in good faith. Sub-section (15) fixes the penalty for not complying.

Special cases also appear in exams. A holding company's auditor can access the records of its subsidiaries and associate companies for consolidation. Branch accounts can be audited by the company's auditor or another qualified person, who sends a report to the company's auditor. For a Government company, the Comptroller and Auditor-General of India appoints the auditor and has the right of supplementary audit.

Key rules to remember

Right of access (s.143(1)): Access at all times to books of account and vouchers, at the registered office or any other place, plus the right to require information and explanation; Extends to records of subsidiaries and associate companies for a holding company's auditor, only as it relates to consolidation.
Matters to inquire into (s.143(1)(a)-(f)): Secured loans | book-entry transactions | securities sold below cost | loans shown as deposits | personal expenses charged to revenue | shares allotted for cash; Clause (c) applies where the company is not an investment company or a banking company.
Main report (s.143(2)): Report to members: accounts give a true and fair view of state of affairs, profit or loss and cash flow; Stated to the best of his information and knowledge, after taking into account the Act, the standards and the matters required in the report.
Further matters in report (s.143(3)): Clauses (a) to (j): information obtained, books kept, branch report, agreement with books, accounting standards, adverse observations, director disqualification, qualifications, internal financial controls, other prescribed matters; Under s.143(4), a negative or qualified answer must state reasons.
Fraud reporting (s.143(12)): Fraud reason-to-believe, at or above the specified amount: report to Central Government. Below the specified amount: report to audit committee or Board; Company must disclose in the Board's report the frauds reported only to the audit committee or Board, in the prescribed manner.
Penalty (s.143(15)): Listed company: ₹5,00,000. Any other company: ₹1,00,000; Applies to an auditor, cost accountant or company secretary in practice who does not comply with sub-section (12).
Application to other audits (s.143(14)): Section applies mutatis mutandis to a cost accountant conducting cost audit under s.148 and a company secretary in practice conducting secretarial audit under s.204; Useful for linking this topic to cost audit and secretarial audit questions.

How to solve Powers, Duties and Reporting of Auditors questions

Most questions give a short fact pattern and ask what the auditor can do, must report or faces as a consequence. Use the same path each time.

1Identify what is being tested: right of access, inquiry duty, report content, fraud or penalty.
2Match the facts to the sub-section: access and inquiry s.143(1), report s.143(2)-(4), branch s.143(8), standards s.143(9), fraud s.143(12)-(13), penalty s.143(15).
3State the rule in plain words with its exact condition, for example 'reason to believe' for fraud and 'immediately' for reporting to the Central Government.
4Apply the rule to the facts. Check the amount threshold, the type of company (listed or other, holding, Government) and who committed the act.
5Decide the report effect: unmodified statement, or negative or qualified answer with reasons under s.143(4).
6Name the consequence or protection: penalty under s.143(15) or good-faith protection under s.143(13).
7Close with a clear conclusion in one sentence.

Quickest way: Sub-section lookup method

When to use it: Use for MCQs and short case scenarios where you have about two minutes.

Spot the keyword: 'access' means (1), 'true and fair' means (2), 'qualification' means (3) and (4), 'branch' means (8), 'fraud' means (12).
Check the condition words: 'reason to believe', 'at all times', 'immediately', 'specified amount'.
Eliminate options that add a requirement not in the section, such as prior Board permission for access.
For penalty, pick ₹5,00,000 for listed and ₹1,00,000 for others.

Common mistakes in Powers, Duties and Reporting of Auditors

Saying the auditor needs the Board's permission to see books or ask for information.
Students think access is a favour from management.
Fix: Remember it is a statutory right at all times, wherever the books are kept, and the auditor can require information and explanation from officers.
Reporting every fraud to the Central Government.
Students ignore the proviso on the specified amount.
Fix: Fraud below the specified amount goes to the audit committee, or to the Board where there is no audit committee. Others go to the Central Government.
Treating the fraud rule as covering any fraud by anyone.
The word 'fraud' is read loosely.
Fix: The sub-section covers an offence involving fraud against the company by its officers or employees, where the auditor has reason to believe it is being or has been committed.
Mixing up the penalty amounts.
Two figures look similar.
Fix: Link ₹5,00,000 to listed companies and ₹1,00,000 to all others.
Leaving out reasons when giving a negative or qualified answer.
Students list the clauses of s.143(3) but forget s.143(4).
Fix: Whenever an answer is negative or qualified, add that the report must state the reasons.
Stating that a branch auditor signs the company's report.
Confusion over who reports to the members.
Fix: The branch auditor prepares a report on the branch and sends it to the company's auditor, who deals with it in his own report as he considers necessary.

Worked examples

Example 1

Mehta & Co. are statutory auditors of Sunrise Textiles Ltd, an unlisted company. During the audit they find reason to believe that the purchase manager has diverted company funds through fake vendor bills. The amount is above the specified amount. The Board asks the auditors to report it to the Board only. Advise the auditors.

Show the solution

Identify the rule: section 143(12) covers an offence involving fraud against the company by officers or employees.
Check facts: the purchase manager is an employee, funds belong to the company and the auditors have reason to believe fraud has occurred.
Check the threshold: the amount is not less than the specified amount, so the proviso for reporting to the audit committee or Board does not apply.
Therefore the auditors must immediately report the matter to the Central Government in the prescribed time and manner.
Protection: under s.143(13), reporting in good faith is not a breach of any other duty the auditors owe.
Consequence of not reporting: under s.143(15), for a company other than a listed company the penalty is ₹1,00,000.

Answer: The auditors must report the fraud to the Central Government immediately, in the prescribed manner, and cannot limit the report to the Board. Good-faith reporting is protected, and failing to report attracts a penalty of ₹1,00,000 as the company is unlisted.

Example 2

While auditing Ganga Foods Ltd, the auditor finds that the company's management has kept some vouchers at a warehouse in another city and refuses to produce them, saying the auditor can inspect only at the registered office. Also, the auditor did not receive some explanations he considers necessary. Explain the auditor's rights and the effect on his report.

Show the solution

Right of access: under s.143(1), the auditor has a right of access at all times to books of account and vouchers, whether kept at the registered office or at any other place.
So the management's argument fails. The warehouse location does not restrict the right.
The auditor is also entitled to require from officers such information and explanation as he considers necessary for his duties.
Report effect: under s.143(3)(a), the report must state whether he has sought and obtained all the information and explanations necessary for the audit, and if not, the details and the effect on the financial statements.
Under s.143(4), as this answer is in the negative, the report must state the reasons.
Further, under s.143(3)(h), any qualification relating to the maintenance of accounts and connected matters must be stated.

Answer: The auditor can insist on access to the vouchers at the warehouse and can require the explanations. If they are still not provided, he must state in his report that he did not obtain all information and explanations, give details and the effect on the financial statements, and give reasons for the negative answer.

Exam tips

Learn the structure of s.143 as a map: (1) access and inquiry, (2) main report, (3) further matters, (4) reasons, (8) branch, (9) standards, (12) to (13) and (15) fraud.
In fraud cases, always check two things: the amount against the specified amount, and whether the person involved is an officer or employee.
In MCQs, watch for options that add conditions not in the Act, such as prior permission for access.
For written answers, give the sub-section, state the rule in your own words, apply it to the facts, and end with a recommendation.
The search topic CARO 2020 is reported under an order made under s.143(11); state only what you are sure of about its contents and applicability and check ICMAI study material for details.

Practice questions from Accounts and Audit

Powers, Duties and Reporting of Auditors in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Powers, Duties and Reporting of Auditors: frequently asked questions

What are the main powers of an auditor under Section 143?

The auditor has a right of access at all times to the books of account and vouchers of the company, wherever they are kept. He can also require from officers such information and explanation as he considers necessary. A holding company's auditor may access subsidiaries' and associates' records for consolidation.

When must an auditor report fraud under Section 143(12)?

When, in the course of his duties, he has reason to believe that an offence involving fraud is being or has been committed against the company by its officers or employees. If the amount is at or above the specified amount he reports immediately to the Central Government. If it is lower, he reports to the audit committee or the Board.

What is the penalty if an auditor does not report fraud?

Under section 143(15), the penalty is ₹5,00,000 for an auditor, cost accountant or company secretary in practice of a listed company. For any other company it is ₹1,00,000.

What must an audit report state under Section 143(3)?

It must state matters such as whether necessary information was obtained, whether proper books were kept, whether the statements agree with the books, and whether they comply with accounting standards. It also covers adverse observations, director disqualification, qualifications on accounts and internal financial controls. Any negative or qualified answer needs reasons.

How does CARO 2020 relate to Section 143?

Section 143(11) lets the Central Government, in consultation with the National Financial Reporting Authority, direct that the auditor's report for specified classes of companies include a statement on specified matters. CARO is issued under this power. Check the applicability thresholds and clauses in the ICMAI study material.