Duties of an auditor:

The duties of an auditor under the Companies Act are discussed below:

Duty to report[Sec.143(2) and (3)].

Section143(2) and (3) of the Companies Act, 2013 requires the auditor to make a
report to the shareholders of the company on the accounts examined by him and on every
financial statement laid before the company in the general meeting during his tenure of office.
Further, section 143 (2) and (3) have laid down that the auditor’s report shall state certain matters
such as:

 Whether, in his opinion and to the best of his knowledge and belief, he received all the
information and explanations are given to him.
 Whether he has obtained all the information and explanations required
for the purpose of audit.
 Whether, in his opinion, proper books of accounts as required by law have
been maintained and proper returns adequate for the purpose of audit
have been received from the branches not visited by him.
 Whether the report on the accounts of any branch office audited under
section143(8) by a person other than the Company’s auditor has been
forwarded to him as required by section 143(2) and how has he dealt with
the same in preparing the auditor’s report.
 Whether the company’s balance sheet and profit and loss account dealt
with by the report are in agreement with the books of account and returns.
 Whether, in his opinion the financial statement comply with the accounting
standards.
 Whether any director is disqualified from being appointed as director under
section 164(2).
 The observation and comments of the auditor on financial transactions or
on matters which have negative effect on the functioning of the company.
 Any qualification, reservation or adverse remarks relating to the maintenance of accounts
and other matters connected there with.
 Whether the company has adequate financial internal controls system in
place and its effectiveness.

Additional responsibility of the Auditor: The Act has required certain aspects which are to
be covered in the report. These includes the following:

 Whether the company has disclosed the impact of any pending litigation
on to financial position.
 Whether the company has made provisions required under any law or
accounting standards for material foreseeable losses on long-term contracts.
 Whether there has been any delay in transferring the amount to the Investor
Education and Protection Fund by the company.
Duty to Inquire[Sec.143(1)].

According to Sec. 143(1), an auditor requires to make inquires into the following six specified
matters:

1. Whether loans and advances made on the basis of security have been
properly secured and the terms on which they have been made, are not
prejudicial to the interest of the company and its shareholders.
2. Whether transactions of the company which are represented merely by
book entries, are not prejudicial to the interest of the company.
3. In case of companies, other them investment or banking companies, whether assets of the
company such as shares, debentures and other securities have been sold at below
purchases price.
4. Whether personal expenses have been charged to Revenue Account.
5. Whether loans and advances made by the company have been shown as
deposits.
6. If shares have been allotted or cash, whether the cash has been corrected.

Duty to make statements on additional matters specified by the Central

Government (Sec, 143(11)].

Section 143 (11) empowers the Central Government to issue suitable instructions to auditors to
report on certain additional matters in the audit report of classes of companies notified.
Other statutory duties: There are some statutory duties of the auditor:

Duty to Assist Investigation: It is the duty of an auditor to assist the inspector when the affairs
of the company are being investigated.

Duty of attend Audit Committee meetings: Section 177 of the Companies Act, 2013. requires
public or private limited companies with paid up capital
of Rs. 20 crores or more to setup an Audit Committee of the Board of Directors for better
corporate governance. This section has laid down a duty on the auditor of the company to attend
and participate in the meetings of the Audit Committee while considering the audit report, but he
shall not have
the right to vote.

Duty to certify Profit and Losses in the Prospectus: It is the duty of an auditor to certify the
profits and losses and the rate of dividend of past 5 years to be shown in the prospectus if the
existing company issue prospectus.

Duty to sign the Report: The auditor has a right as well as the duty to sign the report and
authenticate any other document required by law. In case of a firm of auditor any partner of the
firm practicing in India, can sign the report.

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