Comptroller and Auditor-General of India (CAG) appoints the subsequent auditor under Section 139(5) — not the Board, not the shareholders.
### Can CAG Issue Directions?
Yes. Under Section 143(5), the CAG can direct the auditor on the manner in which the accounts are to be audited.
### Audit Reporting
The appointed auditor must submit a copy of the audit report to the CAG. The report must include:
Directions (if any) issued by the CAG
Action taken on those directions
Impact on the financial statements of the company
Worked example
### Example 1
Q: GSTN is a not-for-profit company limited by shares, with 50% shareholding by the Union Government and 50% by various State Governments. A subsequent auditor is to be appointed for FY 2023-24. Who appoints the auditor? Can any directions be given?
A: GSTN is a Government company (jointly owned by Central and State Governments). Under Section 139(5) read with Section 143(5), the CAG appoints the subsequent auditor and may issue directions on the manner of auditing accounts. The auditor must submit the audit report to the CAG.
### Example 2
Q: The CAG appoints DEF & Co. as auditors of a Central Government-owned company and issues specific directions on how certain grants and subsidies are to be audited. DEF & Co. completes the audit. What must they do with the audit report?
A: DEF & Co. must submit a copy of the audit report to the CAG. The report must include: (i) the directions issued by the CAG, (ii) action taken on those directions, and (iii) their impact on the accounts and financial statements.
⚠️ Common exam mistakes
Assuming Government company auditors are appointed by the Board of Directors — it is the CAG.
Thinking only wholly-owned government companies are covered — companies merely 'controlled' by government also fall under CAG appointment.
Forgetting that the audit report must be submitted to the CAG (not only to the Board or at the AGM).
Missing that partial government ownership (e.g., 50% CG + 50% SG) is sufficient to trigger CAG appointment.
Bare-Act text Section 143(5) read with Section 139(5) · Companies Act, 2013 · click to expand
In the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, the Comptroller and Auditor-General of India shall appoint the auditor under sub-section (5) of section 139 and direct such auditor the manner in which the accounts of the Government company are required to be audited and thereupon the auditor so appointed shall submit a copy of the audit report to the Comptroller and Auditor-General of India.