Company Law and Practice · Accounts and Auditors

Powers and Duties of Auditors under Section 143

Updated 11 October 2026 · Fact-checked

Section 143 of the Companies Act, 2013 gives an auditor the right to access books and vouchers and to demand information, and makes the auditor report to members on whether accounts give a true and fair view. It also requires compliance with auditing standards and reporting of fraud under sub-section (12).

Understand Powers and Duties of Auditors under Section 143

An auditor is an independent person who checks a company's accounts for the members. To do that job, the auditor needs two things: the ability to see the records and the duty to say honestly what was found. Section 143 supplies both.

Think of it in two halves. Powers are what the auditor can demand: access to books and vouchers at any time, and information and explanations from officers. Duties are what the auditor must do: inquire into specified matters, report to members, state specified points in the report, follow auditing standards and report fraud.

The auditor's report goes to the members, not to the board. It must say whether the financial statements give a true and fair view of the state of affairs at year end and of the profit or loss and cash flow for the year. Under sub-section (4), any matter answered in the negative or with a qualification must carry the reasons.

Sub-section (12) is the fraud rule. If the auditor has reason to believe an offence involving fraud is being or has been committed against the company by its officers or employees, the auditor must report it. Reporting goes to the Central Government, or to the audit committee or Board if the fraud involves less than the specified amount. Sub-section (13) protects an auditor who reports in good faith.

The section also reaches beyond the statutory auditor. Sub-section (14) applies it, with necessary changes, to a cost accountant doing cost audit and a company secretary in practice doing secretarial audit.

Key rules to remember

Right of access (s.143(1)): Access at all times to books of account and vouchers, wherever kept; Applies whether records are at the registered office or any other place. Auditor can also require information and explanations from officers as considered necessary.
Matters the auditor must inquire into (s.143(1)(a) to (f)): Six inquiries: secured loans, book entries, sale of securities 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.
Holding company auditor (proviso to s.143(1)): Right of access to records of all subsidiaries and associate companies, so far as it relates to consolidation; Limited to consolidation of financial statements.
Report to members (s.143(2)): True and fair view of state of affairs, profit or loss and cash flow, after considering the Act, accounting and auditing standards; Addressed to members on accounts examined and financial statements laid before the general meeting.
Additional statements (s.143(3)(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; Clause (g) concerns disqualification under section 164(2). Clause (i) covers adequacy and operating effectiveness of internal financial controls with reference to financial statements.
Negative answers (s.143(4)): Negative or qualified answer means reasons must be stated; Do not just say 'no'. Give the reason.
Auditing standards (s.143(9) and (10)): Every auditor must comply with auditing standards; Central Government may prescribe standards recommended by ICAI after consulting NFRA. Until notified, ICAI standards are deemed auditing standards.
Fraud reporting (s.143(12), (13), (15)): Fraud by officers or employees: report to Central Government; if below specified amount, to audit committee or Board; Good-faith reporting is not a breach of duty. Penalty for non-compliance: ₹5,00,000 for a listed company and ₹1,00,000 for any other company.
Branch audit (s.143(8)): Branch auditor sends report to company auditor, who deals with it as he considers necessary; For a branch outside India, the company's auditor or a person qualified under that country's laws may audit.

How to solve Powers and Duties of Auditors under Section 143 questions

Use this method for any question on Section 143, whether it is a theory question or a case-based one.

1Read the question and decide what is asked: a power, a duty, the report contents, branch audit, government company audit or fraud.
2Name the provision first: Section 143 of the Companies Act, 2013 and the relevant sub-section.
3State the rule in plain words with its exact condition, for example 'at all times' for access or 'reason to believe' for fraud.
4Apply the facts: who is the auditor, what did they find, and which clause is triggered.
5For a report question, list what must be stated and remember that a negative answer needs reasons under sub-section (4).
6For a fraud question, check the amount, then decide: Central Government, or audit committee or Board with disclosure in the Board's report.
7Close with a clear conclusion that answers the exact question asked.

Quickest way: Sub-section map for Section 143

When to use it: Use when you have little time and need to place a question in the right sub-section quickly.

(1) is the powers sub-section: access, information, six inquiries, holding company proviso.
(2) and (3) are the report: true and fair view, then the list of statements.
(4) is reasons for negative answers.
(5) to (7) are Government company and CAG matters.
(8) is branch audit.
(9) to (11) are auditing standards and special orders.
(12), (13) and (15) are fraud: report, good-faith protection, penalty.
(14) extends the section to cost audit and secretarial audit.

Common mistakes in Powers and Duties of Auditors under Section 143

Saying the auditor reports to the Board.
Students mix up the audit report with the Board's report.
Fix: Write that the auditor reports to the members under s.143(2). Only fraud below the specified amount goes to the audit committee or Board.
Treating the right of access as limited to the registered office.
Students assume books are kept only at the registered office.
Fix: State that access is at all times, wherever the books are kept.
Reporting every fraud to the Central Government.
Students forget the first proviso to sub-section (12).
Fix: Say that fraud below the specified amount goes to the audit committee or Board, and the company must disclose it in the Board's report.
Not giving reasons for a qualified answer.
Students list the matters in sub-section (3) but skip sub-section (4).
Fix: Always add that a negative or qualified answer must state the reasons.
Applying fraud reporting to any fraud, including by outsiders.
Students read 'fraud' loosely.
Fix: Sub-section (12) covers an offence involving fraud against the company by its officers or employees.
Thinking the holding company auditor can inspect subsidiaries for any purpose.
The proviso is remembered without its limit.
Fix: Write that access to subsidiaries and associates is only in so far as it relates to consolidation.

Worked examples

Example 1

The auditor of Sundaram Textiles Ltd, a listed company, finds that the managing director's family holiday expenses were charged to the revenue account. The officers refuse to show some vouchers kept at the company's godown. Discuss the auditor's rights and duties under Section 143.

Show the solution

Provision: Section 143(1) gives every auditor a right of access at all times to books of account and vouchers, whether kept at the registered office or any other place.
Application: The vouchers are at the godown. The place does not limit the right, so the officers cannot refuse access.
The auditor can also require from officers such information and explanation as he considers necessary.
Duty: Section 143(1)(e) requires the auditor to inquire whether personal expenses have been charged to revenue account. The holiday expenses fall squarely under this inquiry.
Reporting: If the finding affects the answers in the report, section 143(4) requires the auditor to state the reasons for any negative or qualified answer. Observations on matters with an adverse effect on functioning also go in the report under section 143(3)(f).

Answer: The officers cannot deny access to the vouchers at the godown. The auditor must inquire into the personal expenses charged to revenue and report the matter, with reasons for any qualification, to the members.

Example 2

During the audit of Bharat Components Ltd, an unlisted company, the auditor has reason to believe that the accounts manager has been committing an offence involving fraud against the company. The auditor does not report it, saying the Board will find out anyway. Examine the position under Section 143.

Show the solution

Provision: Section 143(12) says that if an auditor has reason to believe an offence involving fraud is being or has been committed against the company by officers or employees, he shall immediately report the matter to the Central Government within the prescribed time and manner.
Application: An accounts manager is an employee. The test is 'reason to believe', not proof, so the auditor must act.
Proviso: If the fraud involves less than the specified amount, the report goes to the audit committee or to the Board, as prescribed. Then the company must disclose the details in the Board's report.
Protection: Under section 143(13), reporting in good faith is not a breach of any duty the auditor owes.
Consequence: Under section 143(15), non-compliance by an auditor of an unlisted company attracts a penalty of ₹1,00,000.

Answer: The auditor was wrong to stay silent. He had to report immediately, to the Central Government or, if the amount is below the specified limit, to the audit committee or Board. Failure attracts a penalty of ₹1,00,000, as the company is not listed.

Exam tips

Write the sub-section number with every point. Examiners reward the exact provision.
In a case question, split your answer into power and duty. This also answers the common 'difference between powers and duties' question.
For fraud questions, always check the amount first. The route of reporting depends on it.
Do not quote the specified amount or the time limits as numbers unless the question gives them. They come from the rules.

Practice questions from Accounts and Auditors

Powers and Duties of Auditors under Section 143 in other exams

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

Powers and Duties of Auditors under Section 143: frequently asked questions

What is the difference between powers and duties of an auditor under Section 143?

Powers are what the auditor may demand, mainly access to books and vouchers and information from officers under sub-section (1). Duties are what the auditor must do, such as inquire into specified matters, report to members, follow auditing standards and report fraud.

To whom does the auditor report fraud under Section 143(12)?

Fraud by officers or employees is reported to the Central Government. If it involves less than the specified amount, the report goes to the audit committee or to the Board. The company must then disclose such frauds in the Board's report.

Who sets the auditing standards under Section 143?

The Central Government may prescribe standards recommended by ICAI, after consulting NFRA. Until standards are notified, ICAI standards are deemed to be the auditing standards. Every auditor must comply with them.

Does Section 143 apply to cost audit and secretarial audit?

Yes. Sub-section (14) applies the section with necessary changes to a cost accountant conducting cost audit and a company secretary in practice conducting secretarial audit.

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

Under sub-section (15), the penalty is ₹5,00,000 for a listed company and ₹1,00,000 for any other company. It applies to an auditor, cost accountant or company secretary in practice who does not comply with sub-section (12).