Section 145 Auditor Signing of Audit Reports

Section 145 auditor signing is one sentence of the Companies Act, 2013 that does two separate jobs. It settles who may put a signature on an auditor's report, by routing the question to section 141(2). And it forces the adverse part of that report into the open, by requiring the auditor's qualifications and adverse comments to be read out at the general meeting and left open to member inspection. This page covers both limbs and the penalty that attaches to them. It is not investment advice.

What section 145 auditor signing actually requires

The section opens with the signing duty. 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.

Two points are easy to miss in that clause.

First, it is not confined to the audit report. It reaches any other document of the company the auditor signs or certifies. A certificate the auditor issues under some other provision is inside section 145 as much as the report is.

Second, the standard it imports is a who may sign rule rather than a how to sign rule. Section 141(2) provides that where a firm, including a limited liability partnership, is appointed as auditor, only the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm. So a firm appointment does not make every partner a signatory. Section 141 is where the Act sets eligibility and disqualification for the office, and section 145 is what carries that test onto the signature line. It surfaces elsewhere as a live question when a firm's tenure ends: how to track auditor resignations covers the case where an auditor has been disqualified under section 141.

The second limb: what the company has to read out

The rest of the section is a disclosure rule, and it is narrower than it first reads. What must be read before the company in general meeting is not the report. It is:

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

Three filters sit in that phrase:

1. the item must be a qualification, observation or comment (the section uses the plurals qualifications, observations or comments)
2. it must be on financial transactions or matters
3. it must have any adverse effect on the functioning of the company

An unqualified report with no adverse observation has nothing that this limb reaches. Where there is such an item, two consequences follow at once: it shall be read before the company in general meeting, and it shall be open to inspection by any member of the company.

That second consequence is the one an outside reader can use. It is a statutory inspection right attaching to the adverse matter itself, sitting alongside the broader right to the financial statements in section 136.

What does section 145 cost an auditor who ignores it?

Section 145 is one of four sections named in section 147(2), the auditor specific penalty sub-section. An auditor who contravenes section 139, section 143, section 144 or section 145 is punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees or four times the remuneration of the auditor, whichever is less. The proviso raises it where the contravention was knowingly or willfully with the intention to deceive the company or its shareholders or creditors or tax authorities, spelling willfully with two letter l's as section 147(2) prints it.

Note which sections are in that list and which are not. Section 145 is in it; so is section 144, the services an auditor cannot render. The general contravention limb in section 147(1), which reaches sections 139 to 146 (both inclusive), catches the company and its officers instead.

Where the signature shows up in the public record

The signed auditor's report travels with the financial statements. For a listed company that means the annual report and the exchange filing of it; for any company it means the copy filed with the Registrar. The signature block on that report is where section 145 and section 141(2) become visible together: the name of the firm, and beneath it the name and membership number of the partner who was entitled to sign for it.

• Auditor rotation under section 139 covers the term the signing auditor holds office for.
• Section 143(12) auditor fraud reporting covers the separate duty that runs to the Central Government rather than to the members.
• How to track auditor resignations covers the filings a change of signatory tends to generate.

Section 145 auditor signing is, in the end, a traceability rule. It fixes a named person to a report and puts that report's worst paragraph in front of the members who own the company.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.