THE EVOLVING ROLE OF AUDITORS UNDER THE COMPANIES ACT, 2013
- Aditi Srivastava
- 5d
- 4 min read
An auditor is an independent professional person qualified to perform an audit. In accounting, an auditor is someone who is responsible for evaluating the validity and reliability of a company or organization’s financial statements.
The role of auditors has significantly evolved under the Companies Act, 2013 (the act), which seeks to enhance accountability and transparency in the corporate sector. The focus has shifted towards new committee dynamics, financial reporting, risk oversight, and evaluation of the audit process. Auditors are now required to be more accountable in their auditing practices, ensuring compliance with the prescribed accounting and auditing standards. Auditors are appointed by the Comptroller and Auditor General (CAG) under section 139 of the act, statutory auditors are responsible for expressing an opinion on financial statements in accordance with standard auditing practices. Section 143 of Act, talks about the powers and duties of auditors and auditing standards.
POWERS OF AN AUDITOR
Section 143 covers both the functions of chartered accountants and cost accountants who hold the position of auditors in a company. 143(1) states that the auditor has the right to examine the books of accounts and financial statements of a company. Here the term ‘books’ includes statutory, statistical and costing books.
There is an inclusive list of matters for which the auditor shall seek information and explanation. This list helps auditors to take special care on serious issues. The list includes issues related to:
Loans and advancement made by the company- - Auditor shall inquire into 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 not prejudicial to the interest of the company or its members.
Transactions represented by book entries- The auditor should verify the all book entry transactions and determine whether such transactions have actually taken place and are not prejudicial to the interest of the company.
Allotment of shares for cash- Auditor should inquire as to whether cash has actually been received in respect of shares stated to have been allotted for cash and if no cash has actually been so received, whether the position as stated in the account books and balance sheet is correct, regular and not misleading.
Sale of investments- Auditor should inquire, whether so much of the assets of the company (except an investment company or a banking company) as consists of shares, debentures and other securities, have been sold at a price less than that at which they were purchased by the company.
Power to inspect branch accounts: According to section 143(8), where the accounts of any branch office are audited by a person other than the company’s auditor, the company’s auditor shall be entitled to visit the branch office, if he deems it necessary to do so for the performance of his duties as an auditor.
Auditor to sign audit reports: According to see 145, only the person appointed as auditor of the company may sign the auditor’s report or authenticate any other document of the company required by law to be signed or authenticated by the auditor.
Auditor in general meeting: It is a prime requirement under section 146, that the company must send all notices and communication to the auditor, relating to any general meeting, and he shall attend the meeting either through himself or through his representative, who shall also be an auditor.
In case of Government Company, the Audit Report among other things, shall include the directions, if any, issued by the Comptroller and Auditor –General of India (CAG), the action taken and the impact thereof on the Company’s accounts and financial statement. The CAG shall have a right to conduct a supplementary audit of the financial statement of the company and comment upon or supplement such audit report within 60 days from the date of receipt of the audit report u/s 143 (5).
DUTIES OF AN AUDITOR
Audit Report: Section 143 (2) requires the auditor to make a report to the members of the company on the accounts examined by him and on every financial statement which is required to be laid in the general meeting of the company. The Audit report should state that to the best of his information and knowledge, the said accounts and financial statements give a true and fair view of the state of the company’s affairs.
Auditing Standards - According to section 143 (9) & (10) every auditor must comply with the auditing standards. While the Central Government prescribes the Auditing Standards or addendums thereto, it shall consult with and take recommendations of the Institute of Chartered Accountants of India (ICAI) and the National Financial Reporting Authority (NFRA).
Fraud Reporting - Section 143(12) to 143 (15) & Rule 13: - If an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government.
Winding Up - As per section 305, at the time of voluntary winding up of a company it is a mandatory requirement that the auditor should attach the copy of the audits of the company prepared by him.
Conclusion
In today’s corporate landscape, auditors are more than just financial examiners, they are guardians of trust and accountability. The Companies Act, 2013 has redefined their responsibilities, ensuring that audits are not merely procedural but integral to transparent governance and risk management. By upholding strict standards and exercising their powers responsibly, auditors strengthen investor confidence, protect stakeholders, and contribute to the integrity of the financial system. Their evolving role highlights the importance of independence, diligence, and ethical judgment in sustaining the credibility of modern business practices.
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