Section 144 of the Companies Act 2013

[Auditor not to render certain services]

As per Provisions of Section- 144 of the Companies Act, 2013, an auditor appointed under the Companies Act, 2013 shall provide to the company only such other services as are approved by the Board of Directors or the audit committee. Accordingly, a Company statutory auditor appoints under section 139 of CA, 2013 shall provide only those services that are approved by either the BOD or the Audit Committee of that company.

The provision of section 144 has been introduced to prohibit statutory auditors from performing non-audit services to ensure the independence and accountability of auditors. The auditor should also be fair and must not allow prejudice or unfairness to override his objectivity. He must be straightforward, sincere, and honest in his approach to his professional work.

Company Statutory Auditors provide only Approved Services

https://www.aubsp.com/section-144-non-audit-services/

List of Non-Audit Services

The list of Non-Audit Services that the Company Auditor can not Render are :

The Board of Directors or Audit Committee of the company must approve other services to be rendered by the Statutory Auditor or CA Firm appointed under Section 139 of the CA, 2013. However, such approved other services shall not include prohibited services. In other words, a company shall not approve the non-audit services specified under Section 144 of the Companies Act, 2013.

Thus, an auditor or audit firm is not allowed to provide the following non-audit services whether directly or indirectly to the company its holding company, or subsidiary company:

a) Accounting and bookkeeping services

b) Internal audit

c) Design and implementation of any financial information system

d) Actuarial services

e) Investment advisory services

f) Investment banking services

g) Rending of outsourced financial services

h) Management services

i) Any other kind of services as may be prescribed.

Section 144(h) of the CA, 2013 has retracted individual auditor or firm to provide “management services” but the meaning and scope of this expression have not been explained further but are explained in other relevant acts.

The central government has also kept the option open under section 144(i) to add other kinds of services to the list of non-audit services.

The term “directly or indirectly” mentioned under section 144 of the CA, 2013 shall include rendering of services by the auditor a mentioned:

i. If the Auditor is an Individual:

In the case of the auditor being an individual, the term “directly or indirectly” hall includes rendering of services:

a) Wither by himself

b) Through his relative

c) Any other person connected o associated with such individual

d) Though any other entity, whatsoever, in which such individual has significant influence or control, or whose name or trademark or brand is used by such individual.

ii. If Auditor is a Firm:

In the case of the auditor being a firm, the term “directly or indirectly” shall include rendering of services:

a) Either y itself

b) Through any of its partners

c) Through its parents, subsidiary, or associate entity

d) Through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trademark or brand is used by such individual.

Punishment for Contravention of provisions of Section 144

https://www.aubsp.com/section-144-non-audit-services/

FAQ’s

1. Can auditor provide consulting services?

Thus if auditor provides any type of management consultancy service it exposes the Self review threat

2. Which of the following services an auditor Cannot render?

An Audit firm should however be prohibited from rendering the following non audit services to its audit client and its subsidiaries: Accounting and book keeping services relating to accounting records.

3. What auditors should not do?

Auditors are not a part of management, which means the auditor will not:
Authorize, execute, or consummate transactions on behalf of a client;
Prepare or make changes to source documents;
Assume custody of client assets, including maintenance of bank accounts;

4. What are the prohibited services for auditors of company?

Prohibited Auditor Activities
bookkeeping or other services related to the accounting records or financial statements of the audit client;
financial information systems design and implementation;
appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
actuarial services;

5. Can auditor of a company certify its form Sh-7 for increase in its authorized share capital?

6. Is section 144 applicable to the audit of a partnership firm?

Business Registration

NGO

COMPLIANCES

Change In Business

BIS & CDSCO

Government Registration

FSSAI

Environmental

Section 144 of Companies Act 2013: Auditor Not to Render Certain Services

Aesha Gandhi

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