Auditor Remuneration Section 142: Who Fixes It
Auditor remuneration section 142 answers a question with two parts: who sets the number, and what the number covers. On the first, the Companies Act, 2013 puts the decision with the members in general meeting and leaves the Board a single narrow exception for the first auditor. On the second, it pulls audit expenses and facilities inside the figure and pushes other service fees outside it. Both parts matter to anyone reading an annual report. It is not investment advice.
Definition
Auditor remuneration
under section 142 of the Companies Act, 2013 is fixed in the company's general meeting, or in such manner as may be determined at that meeting, except that the Board may fix the remuneration of the first auditor it appoints. It includes audit expenses and facilities but not other service fees. Source: Companies Act, 2013, section 142.
How auditor remuneration section 142 assigns the decision
Sub-section (1) is one sentence and a proviso. The remuneration of the auditor of a company shall be fixed in its general meeting or in such manner as may be determined therein.
The two limbs are not the same thing. The members may fix the amount at the meeting, or they may fix the manner in which it is to be determined, which is how a company delegates the working out of the figure to the Board while keeping the authority with the meeting. Either way the source of the power is the general meeting.
The proviso is the only exception: the Board may fix remuneration of the first auditor appointed by it. That tracks the appointment power. Under section 139(6) the Board appoints the first auditor of a company other than a Government company within thirty days of registration, and the proviso lets it fix the pay for the appointment it made. It does not extend to any later auditor.
What the figure includes, and what it deliberately leaves out
Sub-section (2) is the definitional half of the section, and it moves in both directions.
| Item | Inside the section 142 figure? |
|---|---|
| The fee payable to the auditor | Yes |
| Expenses incurred by the auditor in connection with the audit | Yes |
| Any facility extended to the auditor | Yes |
| Remuneration for any other service rendered at the company's request | No |
The inclusion limb reads: the remuneration under sub-section (1) shall, in addition to the fee payable to an auditor, include the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility extended to him. So travel and out of pocket costs reimbursed for the audit are part of the remuneration the meeting fixed, not a separate line the Board can add afterwards.
The exclusion limb is the closing clause: the figure does not include any remuneration paid to him for any other service rendered by him at the request of the company. That carve out is what makes an annual report's audit fee note readable. The section 142 number and the other services number are different numbers by statute.
Two numbers
The split section 142(2) creates between the audit remuneration fixed in general meeting, which absorbs audit expenses and facilities, and fees for other services rendered at the company's request
Source: Companies Act, 2013, section 142(2)
Why does the split between the two numbers matter?
An auditor's independence is the thing the whole chapter is built to protect, and the ratio between those two numbers is one of the few quantitative signals about it that reaches the public record. Where a company pays its audit firm substantially more for other services than for the audit, the services an auditor cannot render under section 144 become the first thing to check, because that section names eight services the auditor may not provide whatever the company is willing to pay for them, plus a ninth residual head of any other kind of services as may be prescribed, which turns on the rules rather than on the section alone.
Two other provisions touch the same figure from different directions:
- Where a company must constitute one, the audit committee recommends the appointment, remuneration and terms of appointment of auditors under section 177(4) before the meeting acts.
- Section 102(2)(a)(iv) treats the appointment of, and the fixing of the remuneration of, the auditors as ordinary business at an annual general meeting, which is why it needs no explanatory statement of its own.
Where the number shows up
For a listed company the section 142 figure is visible twice: in the resolution put to the annual general meeting, and in the payments to auditor note in the financial statements, which conventionally splits statutory audit fee from other services and reimbursement of expenses. Reading those two against each other is the practical use of this section.
A change in the figure is also worth reading next to a change in the auditor. Auditor rotation under section 139 fixes when a firm must go, and how to track auditor resignations covers finding the ones that go early.
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.
Frequently asked questions
Who fixes the auditor's remuneration?
The company in general meeting. Section 142(1) provides that the remuneration of the auditor of a company shall be fixed in its general meeting or in such manner as may be determined therein. The members may fix the figure themselves or settle the manner in which it is to be fixed. Source: Companies Act, 2013, section 142(1).
Can the Board ever fix the auditor's remuneration?
For the first auditor only. The proviso to section 142(1) provides that the Board may fix remuneration of the first auditor appointed by it. That is the single exception in the section, and it tracks the Board's power to appoint the first auditor under section 139(6). Source: Companies Act, 2013, proviso to section 142(1).
What does the remuneration figure include?
Section 142(2) provides that the remuneration shall, in addition to the fee payable to an auditor, include the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility extended to him. Reimbursed audit expenses and facilities are part of the number, not additions outside it. Source: Companies Act, 2013, section 142(2).
Are the auditor's other fees part of the same number?
No. Section 142(2) expressly excludes any remuneration paid to the auditor for any other service rendered by him at the request of the company. Fees for permitted non-audit services sit outside the section 142 figure, which is why the two are usually disclosed separately. Source: Companies Act, 2013, section 142(2).
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