Section 144 - Auditor Not to Render Certain Services
# Section 144 — Auditor Not to Render Certain Services
## Overview
An auditor appointed under the Companies Act, 2013 shall provide to the company only such other services as are approved by the Board of Directors or the Audit Committee (e.g., tax audit, GST audit).
However, the auditor shall NOT render the following services — whether directly or indirectly — to:
The Company (C)
Its Holding Company (H)
Its Subsidiary Company (S)
## Prohibited Services (List of 8)
#
Service
(a)
Accounting and book-keeping services
(b)
Internal audit
(c)
Design and implementation of any financial information system
Other services approved by Board of Directors or Audit Committee
## What Does 'Indirectly' Mean?
The term 'directly or indirectly' includes rendering of services by the auditor:
### Case 1: Auditor is an Individual
Includes services rendered by:
His relative
Any other person connected or associated with such individual
Any other entity in which such individual has significant influence or control (or whose name/trademark/brand is used by such individual)
### Case 2: Auditor is a Firm
Includes services rendered by:
Any of its partners
Its parent, subsidiary or associate entity
Any other entity in which the firm or any of its partners has significant influence or control (or whose name/trademark/brand is used by the firm or its partners)
## Transitional Provision
An auditor who has been performing any of the prohibited services on or before the commencement of the Act shall comply with this section before the closure of the first financial year after such commencement.
Worked example
### Example 1
Example 1: M/s ABC & Co. are statutory auditors of XYZ Ltd. The Board of XYZ Ltd. wants to appoint them to maintain books of accounts. → NOT permissible under Section 144(a). The auditor cannot do accounting/book-keeping for the auditee.
### Example 2
Example 2: CA Ramesh, statutory auditor of PQR Ltd., is approached by PQR's subsidiary, RST Ltd., to conduct its internal audit. → NOT permissible. Section 144 prohibits internal audit to subsidiary (S) as well.
### Example 3
Example 3: M/s XYZ & Associates are auditors of M Ltd. Their relative-owned firm 'XYZ Consultants' provides investment advisory to M Ltd. → NOT permissible — covered under 'indirectly' rendering of services.
### Example 4
Example 4 (Tax Audit): Statutory auditors of A Ltd. are appointed to conduct tax audit u/s 44AB of Income Tax Act with approval of the Audit Committee. → Permissible — tax audit is not in the prohibited list.
### Example 5
Example 5 (Cost Audit): Statutory auditor of B Ltd. cannot be appointed as Cost Auditor (governed separately by Section 148, with its own rotation and independence requirements).
⚠️ Common exam mistakes
Forgetting that the prohibition extends to Holding and Subsidiary companies — not just the company audited.
Treating 'tax audit' or 'GST audit' as prohibited — they are permitted (with appropriate approval).
Ignoring the 'directly or indirectly' rule — services through relative, partner, associate firm, or controlled entity are equally prohibited.
Confusing 'management services' (prohibited) with general professional advisory permitted by Board/Audit Committee.
Forgetting cost audit is governed by Section 148, not Section 144.
Not realising that approval of Board or Audit Committee is mandatory even for permitted non-audit services.
Bare-Act text Section 144, Companies Act, 2013 · Companies Act, 2013 · click to expand
Section 144: An auditor appointed under this Act shall provide to the company only such other services as are approved by the Board of Directors or the audit committee, as the case may be, but which shall not include any of the following services (whether such services are rendered directly or indirectly to the company or its holding company or subsidiary company), namely:—
(a) accounting and book keeping services;
(b) internal audit;
(c) design and implementation of any financial information system;
(d) actuarial services;
(e) investment advisory services;
(f) investment banking services;
(g) rendering of outsourced financial services;
(h) management services; and
(i) any other kind of services as may be prescribed:
Provided that an auditor or audit firm who or which has been performing any non-audit services on or before the commencement of this Act shall comply with the provisions of this section before the closure of the first financial year after the date of such commencement.
Explanation.—For the purposes of this sub-section, the term 'directly or indirectly' shall include rendering of services by the auditor,—
(i) in case of auditor being an individual, either himself or through his relative or any other person connected or associated with such individual or through any other entity, whatsoever, in which such individual has significant influence or control, or whose name or trade mark or brand is used by such individual;
(ii) in case of auditor being a firm, either itself or through any of its partners or through its parent, subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners.