Skip to content

Business Laws and Ethics · Operational and Financial Control

Auditor Not to Render Certain Services under Section 144

Updated 10 October 2026 · Fact-checked

Section 144 of the Companies Act, 2013 bars a statutory auditor from providing certain listed services to the company or its holding company or subsidiary company, directly or indirectly. Other services are not barred by this section. To solve a question, match the service to the prohibited list and check who receives it.

Understand Auditor Not to Render Certain Services (Section 144)

A statutory auditor gives an independent opinion on the company's financial statements. If the same auditor also works for the company in other roles, independence suffers. An auditor who keeps the books cannot objectively check them. An auditor who designs a system cannot fairly judge it.

Section 144 deals with this risk. It bars the auditor from providing certain listed services to the company, its holding company or its subsidiary company, directly or indirectly.

The prohibited services are: accounting and book keeping; internal audit; design and implementation of any financial information system; actuarial services; investment advisory services; investment banking services; rendering of outsourced financial services; management services; and any other kind of services that may be prescribed.

The ban covers the company, its holding company and its subsidiary companies. The ban also applies directly or indirectly. So a prohibited service is not made permissible just because it is provided in an indirect way.

So the test is simple. Check whether the service is on the prohibited list and whether it is for the company or its holding or subsidiary company. If both are true, the service is barred. Services that are not on the list are not prohibited by this section.

Key rules to remember

Core rule
Service on the prohibited list + given to the company, its holding company or its subsidiary company (directly or indirectly) = barred
If the service is not on the list, Section 144 does not bar it.
Prohibited services (Section 144)
(a) Accounting and book keeping; (b) Internal audit; (c) Design and implementation of financial information system; (d) Actuarial services; (e) Investment advisory services; (f) Investment banking services; (g) Outsourced financial services; (h) Management services; (i) Any other service prescribed
Learn these nine heads in order. Questions usually give a service and ask whether it is barred.
Who is covered
Auditor appointed under the Act → services to the company, its holding company or its subsidiary company
The restriction extends to the holding and subsidiary companies, not only the audited company.
Manner
Prohibition applies directly or indirectly
Indirect provision of a barred service is also caught.

How to solve Auditor Not to Render Certain Services (Section 144) questions

Use this method for any case-based or theory question on Section 144.

  1. 1Identify the auditor: confirm that the person or firm is the statutory auditor appointed under the Companies Act, 2013.
  2. 2Identify the recipient: check whether the service is for the audited company, its holding company or its subsidiary company.
  3. 3Name the service precisely and match it to the nine heads of the prohibited list. Look at what the work really is, not what the engagement letter calls it.
  4. 4Note whether the service is given directly or indirectly. The ban applies to both.
  5. 5If the service is on the list, conclude that it is prohibited.
  6. 6If the service is not on the list, state that Section 144 does not bar it.
  7. 7Write a one-line conclusion that links the rule to auditor independence.

Quickest way: List-match check

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

  1. Check the recipient: company, holding or subsidiary. If yes, continue.
  2. Match the service to the nine heads. A match means prohibited; stop there.
  3. No match means Section 144 does not bar the service.
  4. Pick the option that says this. Reject options that say a listed service can be permitted.

Common mistakes in Auditor Not to Render Certain Services (Section 144)

  • Thinking a prohibited service can be made valid by some approval.

    Students assume every restriction can be waived by the management.

    Fix: The listed services are barred by the section itself. Do not write that approval can permit them.

  • Forgetting the holding and subsidiary companies.

    Students read the section as covering only the audited company.

    Fix: Always write 'company, its holding company or its subsidiary company' in your answer.

  • Ignoring the words 'directly or indirectly'.

    Students treat them as filler.

    Fix: Mention that the ban applies whether the service is given directly or indirectly.

  • Confusing internal audit with statutory audit and treating both as allowed or both as barred.

    Both use the word 'audit'.

    Fix: Statutory audit is the auditor's own role. Internal audit for the company is a prohibited service.

  • Listing the prohibited services incompletely or inventing extra ones.

    The list is memorised loosely.

    Fix: Learn the nine heads in order and say 'any other service as may be prescribed' for the last one.

Worked examples

Example 1

M/s Rao & Associates is the statutory auditor of Sundar Textiles Ltd. During the year the firm also maintained the company's books of account and prepared its monthly ledgers. The Board approved this arrangement. Is it permitted under Section 144?

Show the solution
  1. The firm is the statutory auditor, and the service is for the audited company itself.
  2. Maintaining books and ledgers is accounting and book keeping, the first head of the prohibited list.
  3. A service on the prohibited list is barred by the section itself.
  4. So the Board's approval does not make it permitted.

Answer: Not permitted. Accounting and book keeping is a prohibited service under Section 144, and Board approval cannot make it valid.

Example 2

Kiran & Co, statutory auditors of Anand Steels Ltd, are asked by Anand Steels' subsidiary, Anand Castings Ltd, to carry out its internal audit. Separately, Kiran & Co is asked to prepare a note on the company's tax position for Anand Steels Ltd. Examine under Section 144 whether each service is barred.

Show the solution
  1. The restriction applies to services to the company and also to its holding and subsidiary companies. Anand Castings is a subsidiary of the audited company, so it is covered.
  2. Internal audit is on the prohibited list, so Kiran & Co cannot do it for the subsidiary.
  3. A tax position note is not among the nine prohibited heads on the facts given.
  4. So Section 144 does not bar the second service.

Answer: Internal audit for Anand Castings Ltd is prohibited. The tax position note for Anand Steels Ltd is not on the prohibited list, so Section 144 does not bar it.

Exam tips

  • Write the full prohibited list in your answer when the question asks 'which services' an auditor cannot render. Each head earns credit.
  • In case questions, first classify the service, then state the rule, then conclude. This gives clear step marks.
  • For MCQs, watch for options claiming a prohibited service can be allowed by approval. These are traps.
  • Always mention holding and subsidiary companies when the facts involve a group.
  • Link your conclusion to auditor independence in one line. Examiners like the reason behind the rule.

Practice questions from Operational and Financial Control

Auditor Not to Render Certain Services (Section 144) in other exams

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

Auditor Not to Render Certain Services (Section 144): frequently asked questions

Which services can an auditor not provide under Section 144?

A statutory auditor cannot provide accounting and book keeping, internal audit, design and implementation of financial information systems, actuarial services, investment advisory services, investment banking services, outsourced financial services or management services. Any other service that may be prescribed is also barred.

Can an auditor give other services to the company?

Section 144 bars only the listed services. A service that is not on the list is not prohibited by this section.

Does Section 144 apply to holding and subsidiary companies?

Yes. The restriction covers services to the company and to its holding company or subsidiary company, directly or indirectly.

Why does the law bar these services?

The aim is to protect auditor independence. An auditor who also performs management or accounting functions would end up reviewing their own work.