## Section 143(3): What the Audit Report Must State

The Audit Report under Section 143(3) must contain mandatory statements on the following matters — each clause carries marks in exams:

### Clause-by-Clause Requirements

Clause	The Audit Report Must State Whether...
(a)	Auditor obtained all information and explanations necessary for audit; if not — the effect of such deficiency on FS
(b)	Proper books of accounts are kept by the company; and periodic returns received from branches not visited by the auditor
(c)	Branch Auditor's report has been received by principal auditor and dealt with appropriately
(d)	Company's Balance Sheet and P&L agree with the Books of Account and Returns
(e)	FS comply with Accounting Standards (AS / Ind AS)
(f)	Auditor's observations/comments on financial transactions that have an adverse effect on functioning of the company
(g)	Any director is disqualified from being appointed as director
(h)	Any qualification, reservation, or adverse remark relating to maintenance of accounts
(i)	Internal Financial Controls (IFC) are adequate and operating effectively (applicability conditions apply — see IFC topic)
(j)	Other matters as specified in Rule 11

### Memory Aid

Remember: Info → Books → Branch → Balance → Standards → Observations → Director → Qualification → IFC → Rule 11

Worked example

### Example 1

An auditor requested loan agreements from management for verification, but management refused to provide them. Under Sec 143(3)(a), the auditor must state in the report that information was not obtained and describe the effect this has on the reliability of the FS.

### Example 2

A company has 5 branches but did not send periodic returns from 2 branches to the head office. The auditor must comment under Sec 143(3)(b) that proper books were not maintained as periodic returns from unvisited branches were not received.

### Example 3

The auditor discovers that a director was convicted of fraud 3 years ago and is disqualified under Sec 164. The auditor must specifically state this in the audit report under Sec 143(3)(g).

⚠️ Common exam mistakes

Thinking Sec 143(3) only covers qualifications — it has 10 mandatory clauses covering a wide range of matters
Confusing 'branch returns' under clause (b) with 'component auditor's report' under clause (c) — these are separate requirements
Missing that IFC reporting under 143(3)(i) has its own applicability criteria and does not apply to all companies
Forgetting the director disqualification requirement under clause (g) — this is often a separate exam question
Treating clause (j)/Rule 11 as part of Sec 143(3) in the answer — correctly identify it as Rule 11 matters

Bare-Act text Section 143(3) · Companies Act, 2013 · click to expand

The auditor's report shall also state— (a) whether he has sought and obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his audit and if not, the details thereof and the effect of such information on the financial statements...

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Section 143(3): Mandatory Contents of Audit Report

Worked example

⚠️ Common exam mistakes