Think of a company auditor like a doctor doing a health check-up. Section 143 gives the auditor their stethoscope — the right of access to all books, vouchers, and records — and tells them exactly what report to hand to the patient (the members) at the end.
What the auditor can demand (s.143(1)): The auditor has unrestricted access to books of account at any location — registered office or otherwise. Officers of the company must give information and explanation when asked. Beyond this general power, the auditor must specifically sniff out six red flags: loans given without adequate security, fictitious book entries, shares/debentures sold below cost (not applicable to investment or banking companies), loans disguised as deposits, personal expenses booked as company expenses, and allotments shown as cash receipts when no cash actually came in. Holding company auditors get an extra power — access to subsidiary and associate company records for consolidation purposes.
The Audit Report (s.143(2) & (3)): The report goes to the members, not the directors. It must give a true and fair view of the company's financial position, P&L, and cash flows. The auditor must specifically state: whether they got all info needed, whether proper books are maintained, whether branch audit reports were received and handled, whether accounts agree with books, whether accounting standards are complied with, observations on adverse financial transactions, whether any director is disqualified under s.164(2), any qualifications or adverse remarks, and — critically for exams — whether adequate internal financial controls are in place and operating effectively. If any matter is answered negatively or with a qualification, reasons must be stated (s.143(4)).
Government Companies: CAG appoints the auditor, receives the audit report, and has 60 days to conduct a supplementary audit or comment on the report. CAG comments must be circulated to all members alongside the main audit report. The CAG can also order a test audit separately.
Branch Audits (s.143(8)): A branch can be audited by the company's auditor or a separately appointed branch auditor. For overseas branches, a locally qualified auditor is acceptable. Branch auditor sends their report to the company's auditor, who then incorporates it in the main report as they see fit. Auditing Standards (s.143(9)&(10)): Every auditor must comply with auditing standards prescribed by Central Government (on ICAI recommendation). Until formal notification, ICAI standards apply. This is asked frequently as a 4-mark question — know the flow from ICAI → NFRA → Central Government.
📊 Worked example
Example 1 — Identifying the red flag under s.143(1)
Rajesh & Co. Pvt. Ltd. gave an unsecured loan of ₹25,00,000 to a related party at 2% interest, while market rate is 12%. The auditor during audit finds no collateral, no board approval, and the loan is shown in books as 'Trade Advances.'
Working:
- Issue 1 (s.143(1)(a)): Loan not secured → auditor must report that loan is not properly secured AND terms (2% vs 12%) are prejudicial to company interests.
- Issue 2 (s.143(1)(d)): Loan shown as 'Trade Advances' (i.e., deposits) instead of 'Loans' → auditor must flag misclassification.
- Issue 3: Both matters answered negatively in audit report → reasons must be stated as per s.143(4).
Answer: Auditor must report both violations with reasons. If not reported, auditor faces liability under s.147.
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Example 2 — CAG Supplementary Audit timeline
A Government company's statutory auditor submits the audit report to CAG on 1st June 2025.
Working:
- CAG has 60 days from receipt = deadline is 31st July 2025.
- Within this window, CAG can (a) conduct supplementary audit and/or (b) comment on/supplement the audit report.
- If CAG gives comments, the company must send those comments to every member entitled under s.136(1) and place them at the AGM alongside the main audit report.
Answer: Last date for CAG action = 31st July 2025. CAG comments have the same circulation requirement as the main audit report.
⚠️ Common exam mistakes
- Students think the audit report goes to directors — it doesn't. Section 143(2) clearly states the report is made to the members of the company. Directors receive it incidentally, not as the primary audience.
- Mixing up s.143(1) access rights with audit report contents — Access rights (sub-section 1) are the powers; the report contents (sub-sections 2 & 3) are the duties. Exam questions often test one or the other — don't jumble them together in your answer.
- Forgetting the 60-day CAG window — Many students write 'CAG can conduct supplementary audit anytime.' Wrong. The 60-day clock starts from receipt of audit report, not from the date of signing or the AGM.
- Assuming the branch auditor sends the report directly to members — The branch auditor sends the report to the company's auditor (not to members, not to the board). The company's auditor then decides how to deal with it in their consolidated report.
- Overlooking the Internal Financial Controls (IFC) reporting requirement — s.143(3)(i) requires the auditor to comment on adequacy AND operating effectiveness of IFC. Students often write only 'adequacy.' Both elements must be covered for full marks.
📖 Bare Act text — Section 143, Companies Act 2013
(click to expand)
(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:—(a) whether loans and advances made by the company on the basis of security have been properly secured and whether the terms on which they have been made are prejudicial to the interests of the company or its members; (b) whether transactions of the company which are represented merely by book entries are prejudicial to the interests of the company; (c) where the company not being an investment company or a banking company, whether so much of the assets of the company as consist of shares, debentures and other securities have been sold at a price less than that at which they were purchased by the company; (d) whether loans and advances made by the company have been shown as deposits; (e) whether personal expenses have been charged to revenue account; (f) where it is stated in the books and documents of the company that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance sheet is correct, regular and not misleading: Provided that the auditor of a company which is a holding company shall also have the right of access to the records of all its subsidiaries and associate companies in so far as it relates to the consolidation of its financial statements with that of its subsidiaries and associate companies. (2) The auditor shall make a report to the members of the company on the accounts examined by him and on every financial statements which are required by or under this Act to be laid before the company in general meeting and the report shall after taking into account the provisions of this Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of this Act or any rules made thereunder or under any order made under sub-section (11) and to the best of his information and knowledge, the said accounts, financial statements give a true and fair view of the state of the company's affairs as at the end of its financial year and profit or loss and cash flow for the year and such other matters as may be prescribed. (3) 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; (b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears from his examination of those books and proper returns adequate for the purposes of his audit have been received from branches not visited by him; (c) whether the report on the accounts of any branch office of the company audited under sub-section (8) by a person other than the company's auditor has been sent to him under the proviso to that sub-section and the manner in which he has dealt with it in preparing his report; (d) whether the company's balance sheet and profit and loss account dealt within the report are in agreement with the books of account and returns; (e) whether, in his opinion, the financial statements comply with the accounting standards; (f) the observations or comments of the auditors on financial transactions or matters which have any adverse effect on the functioning of the company; (g) whether any director is disqualified from being appointed as a director under sub-section (2) of section 164; (h) any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith; (i) whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls; (j) such other matters as may be prescribed. (4) Where any of the matters required to be included in the audit report under this section is answered in the negative or with a qualification, the report shall state the reasons therefor. (5) 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) or sub-section (7) of Section 139 and direct such auditor the manner in which the accounts of the 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 which, among other things, include the directions, if any, issued by the Comptroller and Auditor-General of India, the action taken thereon and its impact on the accounts and financial statement of the company. (6) The Comptroller and Auditor-General of India shall within sixty days from the date of receipt of the audit report under sub-section (5) have a right to,—(a) conduct a supplementary audit of the financial statement of the company by such person or persons as he may authorise in this behalf; and for the purposes of such audit, require information or additional information to be furnished to any person or persons, so authorised, on such matters, by such person or persons, and in such form, as the Comptroller and Auditor-General of India may direct; and (b) comment upon or supplement such audit report: Provided that any comments given by the Comptroller and Auditor-General of India upon, or supplement to, the audit report shall be sent by the company to every person entitled to copies of audited financial statements under sub section (1) of section 136 and also be placed before the annual general meeting of the company at the same time and in the same manner as the audit report. (7) Without prejudice to the provisions of this Chapter, the Comptroller and Auditor-General of India may, in case of any company covered under sub-section (5) or sub-section (7) of section 139, if he considers necessary, by an order, cause test audit to be conducted of the accounts of such company and the provisions of section 19A of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 (56 of 1971), shall apply to the report of such test audit. (8) Where a company has a branch office, the accounts of that office shall be audited either by the auditor appointed for the company (herein referred to as the company's auditor) under this Act or by any other person qualified for appointment as an auditor of the company under this Act and appointed as such under section 139, or where the branch office is situated in a country outside India, the accounts of the branch office shall be audited either by the company's auditor or by an accountant or by any other person duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that country and the duties and powers of the company's auditor with reference to the audit of the branch and the branch auditor, if any, shall be such as may be prescribed: Provided that the branch auditor shall prepare a report on the accounts of the branch examined by him and send it to the auditor of the company who shall deal with it in his report in such manner as he considers necessary. (9) Every auditor shall comply with the auditing standards. (10) The Central Government may prescribe the standards of auditing or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949 (38 of 1949), in consultation with and after examination of the recommendations made by the National Financial Reporting Authority: Provided that until any auditing standards are notified, any standard or standards of auditing specified by the Institute of Chartered Accountants of India shall be deemed to be the auditing standards. (11) The Central Government may, in consultation with the National Financial Reporting Authority, by general or special order, direct, in respect of such class or description of companies, as may be specified in the order, that the auditor's report shall also include a statement on such matters as may be specified therein: Provided that until the National Financial Reporting Authority is constituted under section 132, the Central Government may hold consultation required under this sub-section with the Committee chaired by an officer of the rank of Joint Secretary or equivalent in the Ministry of Corporate Affairs and the Committee shall have the representatives from the Institute of Chartered Accountants of India and Industry Chambers and also special invitees from the National Advisory Committee on Accounting Standards and the office of the Comptroller and Auditor-General.
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