When an auditor finishes examining a company's books, someone has to put their name on the report — and the law is very specific about who that person must be. Section 145 lays down two things: the signing requirement and what happens to adverse remarks in the report.
Who signs? The auditor signs the report in accordance with Section 141(2) — this is the cross-reference you must remember. If the auditor is an individual CA, they sign personally. If it's an audit firm, only the partner who is a CA in practice and who is responsible for that audit signs — not just any partner. The firm's name alone is not enough; the signing partner's membership number must also appear. Think of it like this: if CA Rajesh Sharma of M/s Sharma & Co. is handling Reliance Pipes Pvt. Ltd.'s audit, Rajesh signs — not just the firm stamp.
The same rule applies to any other document of the company the auditor certifies — certificates, limited review reports, etc. The identity and qualification of the signing person must comply with 141(2).
What about adverse remarks? This is the part students often miss. If the auditor's report contains qualifications, observations, or comments that have an adverse effect on the functioning of the company — say, a going-concern doubt, a fraud flagged, or a significant internal control weakness — then two things must happen: (1) these remarks must be read out before the company in general meeting (usually the AGM), and (2) the report must be open to inspection by any member of the company. The idea is simple: shareholders have a right to know when something is seriously wrong. You can't bury bad news in a footnote that nobody reads aloud.
This section is frequently asked as a 4-mark theory question — either as a straight explain, or paired with a scenario like "CA Priya signed the report but is not a partner in practice — is this valid?"
📊 Worked example
Example 1 — Correct signing scenario
M/s Iyer & Associates is appointed as statutory auditor of Rajesh & Co. Pvt. Ltd. for FY 2024-25. The firm has three partners: CA Meena Iyer (in practice), Mr. Suresh Iyer (not a CA), and CA Ravi Kumar (in practice but not handling this audit).
Question: Who should sign the audit report?
Working:
- The signing person must satisfy Section 141(2): must be a CA in full-time practice AND the partner responsible for the audit.
- Mr. Suresh Iyer → Not a CA → Cannot sign.
- CA Ravi Kumar → CA in practice, but not the partner handling this audit → Should not sign.
- CA Meena Iyer → CA in practice + responsible for this audit → Must sign, along with the firm name and her ICAI membership number.
Answer: CA Meena Iyer signs the report on behalf of M/s Iyer & Associates.
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Example 2 — Adverse remarks and AGM obligation
CA Vikram audits Sunrise Textiles Ltd. His report contains: (a) a qualification that inventory worth ₹45,00,000 is overvalued by ₹12,00,000, and (b) a comment that the company has defaulted on a term loan of ₹2,50,00,000.
Question: What are the company's obligations under Section 145?
Working:
- Both the inventory overvaluation remark and the loan default comment adversely affect the functioning of the company.
- Under Section 145, these must be: read aloud at the AGM in full, and made available for inspection to any member who requests it.
- The company cannot skip reading these remarks or summarise them vaguely.
Answer: The company must read both adverse observations at the AGM and keep the full report open for member inspection. Failure to do so is a violation of Section 145.
⚠️ Common exam mistakes
- Students think the firm name alone is sufficient for signing. Wrong — the individual partner who is a CA in practice and responsible for the audit must sign personally, along with the firm name and their ICAI membership number.
- Students ignore the Section 141(2) cross-reference. Section 145 does not repeat the eligibility conditions — it points to 141(2). In an exam, if asked about signing, always cite both sections together.
- Students assume 'any adverse remark' must be read at the AGM. The trigger is remarks that have an adverse effect on the functioning of the company — minor observations without functional impact may not always trigger this. However, in an exam, when in doubt, treat qualifications and key observations as covered.
- Students confuse 'open to inspection' with publishing. Section 145 only requires the report to be available for any member to inspect — not that it must be published or sent to every member separately.
- Students forget this applies to other documents too, not just the audit report. Certificates, limited review reports, and other documents the auditor signs must also comply with the Section 141(2) signing requirement.
📖 Bare Act text — Section 145, Companies Act 2013
(click to expand)
The person appointed as an auditor of the company shall sign the auditor's report or sign or certify any other document of the company in accordance with the provisions of sub-section (2) of section 141, and the qualifications, observations or comments on financial transactions or matters, which have any adverse effect on the functioning of the company mentioned in the auditor's report shall be read before the company in general meeting and shall be open to inspection by any member of the company.
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