# Powers & Duties of Auditors [Sections 143 and 146]

## (1) Powers / Rights of Auditors [Section 143]

### (a) Right of Access to Books & Vouchers

Auditor has the right of access to the books of account and vouchers of the company at all times — whether maintained at the registered office or any other place.

### (b) Right of Access to Subsidiary/Associate Records

For consolidation of financial statements, the auditor has the right of access to records of subsidiary and associate companies.

### (c) Right to Require Information & Explanation

Auditor may require from officers of the company such information and explanation as he considers necessary for the performance of his duties.

## (2) Duties of Auditors — Matters of Inquiry [Section 143(1)]

The auditor shall inquire into the following matters:

### (a) Loans & Advances Given by Company

Whether they are properly secured, and
Whether terms of such loans & advances are prejudicial to the interests of the company or its members.

### (b) Transactions Represented Merely by Book Entries

Whether such transactions are prejudicial to the interest of the company.

### (c) Sale of Securities at Loss

Where the company is not an investment company or banking company, whether its assets (consisting of shares, debentures and other securities) are sold at a price less than the purchase price.

### (d) Loans & Advances Disguised as Deposits

Whether loans and advances given by the company are shown as deposits in the books.

### (e) Personal Expenses

Whether personal expenses are charged to the revenue account (P&L).

### (f) Allotment for Cash

Where the books and documents state that shares have been allotted for cash:

Whether cash has actually been received on allotment, and
If no cash has been received, whether the books and balance sheet are correct, regular and not misleading.

## (3) Auditor's Right to Attend General Meeting [Section 146]

### Right to Receive Notices

All notices and other communications relating to general meetings shall be forwarded to the auditor.

### Right to Attend

The auditor (or his authorised representative who is qualified to be an auditor) has the right to attend the general meeting.

### Right to Be Heard

The auditor shall have the right to be heard at the meeting on any part of the business which concerns him as the auditor.

## Summary: Powers vs Duties

Powers (Rights)	Duties
Access to books, vouchers (all times, all places)	Inquire into loans/advances — security & terms
Access to subsidiary/associate records (for CFS)	Inquire into book-entry transactions
Require information from officers	Inquire into sale of securities below cost
Receive notices of GM, attend & be heard	Inquire into loans shown as deposits
	Check whether personal expenses charged to revenue
	Verify cash actually received on allotment

Worked example

### Example 1

Example: Auditor's Right Regarding Subsidiary Records

ABC Ltd., the holding company of XYZ Ltd., is preparing consolidated financial statements. The auditor of ABC Ltd. demands access to the books of account of XYZ Ltd. for verification.

Analysis:

Under Section 143(1), the auditor of the holding company has the right of access to the records of subsidiary and associate companies in relation to the consolidation of financial statements.

Conclusion: ABC Ltd.'s auditor is entitled to access XYZ Ltd.'s records to the extent necessary for consolidation — not for any other purpose.

### Example 2

Example: Personal Expenses Charged to P&L

During audit, Mr. Auditor finds that the Managing Director's personal vacation expenses have been booked as 'Travelling Expenses' in the P&L account.

Analysis:

Section 143(1)(e) requires the auditor to inquire whether personal expenses have been charged to the revenue account.

Conclusion: The auditor must:

Inquire from management and seek written explanation,
If unsatisfied, report it in his audit report,
Consider qualifying the report if not corrected.

⚠️ Common exam mistakes

Limiting auditor's access to the registered office only — access is available 'at all times' to books kept at any place.
Believing the auditor of the holding company has unrestricted access to subsidiary records — access is only for consolidation purposes.
Forgetting that the auditor must be forwarded all notices of general meetings (not just AGM).
Confusing 'inquire' (S. 143(1)) with 'report' (S. 143(3)) — inquiry items are matters auditor must examine; not all need separate reporting unless adverse findings.
Missing that the right to attend GM includes the right to be heard on matters concerning auditor.
Treating personal expenses as a non-audit issue — it is a specific inquiry duty under S. 143(1)(e).
Forgetting the 'sale below cost' duty applies only to companies other than investment or banking companies.

Bare-Act text Sections 143 and 146 · Companies Act, 2013 · click to expand

Section 143(1) — Every auditor of a company shall have a right of access at all times to the books of account and vouchers of the company, whether kept at the registered office of the company or at any other place and shall be entitled to require from the officers of the company such information and explanation as he may consider necessary for the performance of his duties as auditor and amongst other matters inquire into the following matters, namely... Section 146 — All notices of, and other communications relating to, any general meeting shall be forwarded to the auditor of the company...

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Powers and Duties of Auditors – Sections 143 and 146

Worked example

⚠️ Common exam mistakes