Section 143 of CA 2013 : Section 143: Powers And Duties Of Auditors And Auditing Standards

Explanation using Example

Imagine a scenario where ABC Private Limited is undergoing its annual audit. The auditor, Mr. Smith, is exercising his rights under Section 143 of The Companies Act, 2013. He begins by requesting access to the company's books of account and vouchers, which are kept both at the registered office and at a secondary location.

During his audit, Mr. Smith notices that the company has made several loans and advances on the basis of security. To ensure compliance with Section 143(1)(a), he verifies if these loans are properly secured and whether the terms are in the company's best interest. He also scrutinizes the company's transactions to ensure they are not merely book entries that could be prejudicial to the company's interests, as per Section 143(1)(b).

While examining the financial statements, Mr. Smith finds discrepancies in the cash received from share allotments. He recalls Section 143(1)(f), which mandates him to check if the cash stated to have been received for share allotments was indeed received. Upon finding out that the cash was not received, he knows he must report this in his audit report to reflect a correct, regular, and non-misleading state of the company's finances.

As ABC Private Limited is a subsidiary of a holding company, Mr. Smith also exercises his right under the proviso to Section 143(1) to access the records of the holding company for the purpose of consolidating financial statements.

Mr. Smith prepares his audit report in accordance with Section 143(2), ensuring that it reflects a true and fair view of ABC Private Limited's financial position. He includes a statement on whether he has received all necessary information for the audit, as required by Section 143(3)(a).

Finally, Mr. Smith submits his audit report to the company's members. He knows that if he had discovered any fraud during his audit, Section 143(12) would oblige him to report it to the Central Government within the prescribed time and manner.

This example illustrates how Section 143 of The Companies Act, 2013 is used in practice to ensure that auditors have the necessary rights and obligations to conduct a thorough and compliant audit of a company's financial statements.