Business Laws and Ethics · Operational and Financial Control

List of Prohibited Services under Section 144

Updated 10 October 2026 · Fact-checked

Section 144 of the Companies Act, 2013 bars an auditor from giving the company, its holding company or its subsidiary certain non-audit services: accounting and bookkeeping, internal audit, financial information system design, actuarial, investment advisory, investment banking, outsourced financial services, management services and any other prescribed service. Other services need Board or audit committee approval, unless prescribed as barred.

Understand List of Prohibited Services under Section 144

An auditor must be independent. If the same person also keeps the books, designs the systems or manages the company, the auditor ends up checking their own work. Section 144 stops this by barring specific services.

The rule has two parts. First, services outside the list, and not prescribed as prohibited under item (i), may be given only if the Board of Directors or the audit committee, as the case may be, approves them. Second, even with approval, the services in the prohibited list can never be given.

The list runs from (a) to (i). Items (a) to (h) are named: accounting and book keeping services; internal audit; design and implementation of any financial information system; actuarial services; investment advisory services; investment banking services; rendering of outsourced financial services; and management services. Item (i) is any other kind of services as may be prescribed.

The ban applies whether the services are given directly or indirectly, and to the company, its holding company or subsidiary company. So an auditor of a subsidiary cannot do a barred job for the parent either.

The Explanation states what "directly or indirectly" includes, and it has two separate limbs:

Individual auditor: services rendered by himself, or through his relative or any other person connected or associated with him, or through any other entity in which he has significant influence or control, or whose name, trade mark or brand he uses.
Audit firm: services rendered by the firm itself, or through any of its partners, or through its parent, subsidiary or associate entity, or through any other entity in which the firm or any partner has significant influence or control, or whose name, trade mark or brand the firm or any partner uses.

There is also a transition proviso. An auditor who was already doing non-audit services before the Act commenced had to comply before the closure of the first financial year after commencement.

Key rules to remember

Rule on other services: Service outside the prohibited list (a)-(i) = allowed only if approved by the Board or the audit committee, as the case may be; Both conditions must be met: the service must not be prohibited, and it must be approved. Approval alone does not cure a prohibited service.
The prohibited list, (a) to (i): (a) accounting and book keeping; (b) internal audit; (c) design and implementation of any financial information system; (d) actuarial services; (e) investment advisory; (f) investment banking; (g) rendering of outsourced financial services; (h) management services; (i) any other service as may be prescribed; Memory aid: group them as books, audit, systems, actuarial, advice, banking, outsourcing, management, prescribed.
Reach of the ban: Auditor → company + its holding company + its subsidiary company; directly or indirectly; Individual auditor: indirect includes services through his relative or a connected or associated person, or an entity he controls or influences significantly or whose name or brand he uses. Firm: indirect includes services through its partners, its parent, subsidiary or associate entity, or an entity the firm or a partner controls or influences significantly or whose name or brand the firm or a partner uses.

How to solve List of Prohibited Services under Section 144 questions

Use this method for any question asking whether an auditor may render a service.

1Identify the auditor (individual or firm) and the company receiving the service.
2Check whether the service is given to the company, its holding company or its subsidiary company. If yes, Section 144 applies.
3Match the service to the list: accounting and book keeping, internal audit, financial information system design and implementation, actuarial, investment advisory, investment banking, outsourced financial services, management services.
4Check whether the service is given indirectly. For an individual auditor, look at a relative, a connected or associated person, or an entity he controls or whose brand he uses. For a firm, look at its partners, its parent, subsidiary or associate entities, or an entity the firm or a partner controls or whose brand is used. Indirect rendering is also barred.
5If the service matches the list, conclude it is prohibited, even if the Board approves.
6If it is not in the list and not prescribed as prohibited under item (i), state that it may be given only if approved by the Board or audit committee, as the case may be.
7Conclude in one line with the reason: auditor independence.

Quickest way: Match-and-block check

When to use it: For MCQs and short scenario questions where you have under two minutes.

Underline the service in the question.
Run through the eight named items. Does it match any one in meaning?
If yes, the answer is prohibited. Ignore any mention of approval or consent.
If no, the answer is permitted only with Board or audit committee approval (unless the service is prescribed as prohibited).
Watch for the words holding, subsidiary, relative or partner. A relative or connected person points to an individual auditor. A partner, or a parent, subsidiary or associate entity, points to a firm. Both confirm the ban reaches further.

Common mistakes in List of Prohibited Services under Section 144

Thinking Board approval can allow a prohibited service.
The section says services need approval, so students assume approval fixes everything.
Fix: Approval only covers services outside the list. Listed services are barred whatever the Board says.
Forgetting that holding and subsidiary companies are covered.
Students read the section as only about the audited company.
Fix: Always check the whole group. A barred service to the holding or subsidiary is also barred.
Ignoring indirect rendering.
Students see no direct link between the auditor and the service provider.
Fix: Match the route to the auditor. For an individual auditor, check relatives, connected or associated persons, and entities he controls or whose name or brand he uses. For a firm, check partners, parent, subsidiary or associate entities, and entities the firm or a partner controls or whose name or brand is used.
Writing 'internal audit' as allowed because it is an audit.
The word audit sounds close to the auditor's own work.
Fix: Statutory audit and internal audit are different. Internal audit by the statutory auditor is specifically barred in item (b).
Missing or mixing up list items.
The list runs from (a) to (i) and is learned loosely.
Fix: Memorise it in order (a) to (i) and remember that (i) covers other services as may be prescribed.
Saying the audit committee alone approves permitted services.
Students recall only one body.
Fix: Write 'Board of Directors or the audit committee, as the case may be'.

Worked examples

Example 1

Mehta & Associates are the statutory auditors of Sunrise Textiles Ltd. The Board asks them to also maintain the company's books of account and offers to approve this by resolution. Can they accept? Give reasons.

Show the solution

The service is maintaining books of account. This is accounting and book keeping, item (a) of Section 144.
Item (a) is in the prohibited list.
Board approval applies only to services outside the list, so the resolution cannot cure the ban.
The ban protects independence: the auditor would be auditing its own work.

Answer: No. Accounting and book keeping services are prohibited for an auditor under Section 144, and Board approval does not permit them.

Example 2

Rao & Co. audit Kaveri Foods Ltd. Rao & Co. also provide investment advisory services to Kaveri Foods' wholly owned subsidiary, Kaveri Exports Ltd. A partner's brother runs a firm that gives actuarial services to Kaveri Foods. Comment on each situation.

Show the solution

Advisory to the subsidiary: investment advisory services are item (e). The ban covers services to the company or its subsidiary company, so the service to Kaveri Exports is covered.
Actuarial services by the partner's brother's firm: actuarial services are item (d).
The Explanation says rendering services directly or indirectly includes service through a partner, or any other entity in which the firm or a partner has significant influence or control, or whose name, trade mark or brand is used. The facts say only that a partner's relative runs the firm, so the key question is whether the firm is rendering the service indirectly in this sense.
Where the actuarial firm is controlled or influenced by the auditor or a partner, or uses their name or brand, the service is indirect and barred. The mere fact that a brother runs a separate firm does not by itself settle it under the text of this Explanation (a relative route is stated for an individual auditor).

Answer: Investment advisory to the subsidiary is prohibited. The actuarial service is prohibited only if it is rendered indirectly through the auditor or its partner in the ways described in the Explanation, such as control, significant influence, or use of the firm's name or brand.

Exam tips

Learn the list in order and write it as numbered points. Examiners look for each named service.
In scenario questions, state the rule first, then match the facts, then conclude. This earns step marks.
Always mention independence as the reason behind the section.
Name 'holding company or subsidiary company' and 'directly or indirectly' in any answer on scope.
For MCQs, if the service matches the list, mark prohibited. Do not be tempted by an option mentioning approval.

Practice questions from Operational and Financial Control

List of Prohibited Services under Section 144: frequently asked questions

Can a statutory auditor do internal audit for the same company under the Companies Act, 2013?

No. Internal audit is item (b) in the list of services barred by Section 144. The ban also covers the company's holding and subsidiary companies.

Can the Board approve a prohibited service?

No. Board or audit committee approval is needed for other services, but the section says those services shall not include the listed ones. Approval cannot turn a prohibited service into a permitted one.

What are the services prohibited to an auditor under Section 144?

They are accounting and book keeping, internal audit, design and implementation of any financial information system, actuarial, investment advisory, investment banking, outsourced financial services, management services, and any other service as may be prescribed.

Does the ban apply if the service is given through a relative or another entity?

Yes. The Explanation covers services rendered indirectly. For an individual auditor this includes service through a relative or any person connected or associated with the auditor, or an entity the auditor controls or whose name or brand is used. For a firm it includes partners and its parent, subsidiary or associate entities.