Sections 145, 146 and 147 of Companies Act 2013: Auditor Duties, General Meetings and Penalties
Sections 145 to 147 form part of Chapter X of the Companies Act, 2013 dealing with audit and auditors. They address the signing of audit reports and related documents, an auditor's participation in general meetings, and the consequences of specified contraventions.
Section 145 - Auditor to sign audit reports, etc.
Meaning: Section 145 places responsibility on the person appointed as auditor to sign the auditor's report and to sign or certify other company documents in accordance with Section 141(2). It also requires qualifications, observations or comments concerning financial transactions or matters that adversely affect the functioning of the company, when mentioned in the auditor's report, to be read before the company in general meeting and made available for inspection by members.
The practical effect is that the statutory audit report is not merely a filing document. Material adverse qualifications, observations and comments identified in the report must also be brought before the general meeting, where members may inspect them.
Section 141(2), referred to in Section 145, deals with appointment of an audit firm and provides that only partners who are chartered accountants may act and sign on behalf of the firm.
Section 146 - Auditors to attend general meeting
Meaning: Notices and other communications relating to a general meeting must be forwarded to the company's auditor. Unless the company exempts the auditor, the auditor must attend the general meeting personally or through an authorised representative who is also qualified to be an auditor.
The auditor also has a statutory right to be heard at the meeting on any part of the business that concerns the auditor in that capacity. This provision supports communication between members and the statutory auditor on audit-related matters considered at a general meeting.
Section 147 - Punishment for contravention
Meaning: Section 147 prescribes consequences for contraventions of specified provisions in Chapter X. The liability differs depending on whether the default is attributable to the company or its officers, to the auditor, or involves a knowing or wilful intention to deceive.
Section 147(1): company and officers in default
If any provision of Sections 139 to 146, both inclusive, is contravened, the company is punishable with a fine of not less than Rs. 25,000 and up to Rs. 5,00,000. Every officer of the company who is in default is punishable with a fine of not less than Rs. 10,000 and up to Rs. 1,00,000.
The Companies (Amendment) Act, 2020 removed the earlier imprisonment provision applicable to officers in default under Section 147(1), with effect from 21 December 2020.
Section 147(2): contravention by auditor
If an auditor contravenes Section 139, Section 143, Section 144 or Section 145, the auditor is punishable with a fine of not less than Rs. 25,000 and up to Rs. 5,00,000 or four times the remuneration of the auditor, whichever is less.
If the contravention is committed knowingly or wilfully with the intention to deceive the company, its shareholders, creditors or tax authorities, the proviso to Section 147(2) provides for imprisonment for a term that may extend to one year and a fine of not less than Rs. 50,000, which may extend to Rs. 25,00,000 or eight times the remuneration of the auditor, whichever is less.
Section 147(3): refund of remuneration and damages
Where an auditor is convicted under Section 147(2), the auditor is also liable to refund the remuneration received from the company and to pay damages for loss arising from incorrect or misleading statements of particulars in the audit report to the persons and authorities covered by the provision.
Section 147(4): mechanism for prompt payment of damages
Sub-section (4) empowers the Central Government to specify, by notification, a statutory body, authority or officer for ensuring prompt payment of damages under Section 147(3)(ii), with reporting to the Central Government in the prescribed manner.
Section 147(5): liability where audit is conducted by a firm
Where an audit is conducted by an audit firm and a partner or partners are proved to have acted fraudulently, abetted fraud or colluded in fraud by or in relation to the company, its directors or officers, Section 147(5) addresses civil and criminal liability of the concerned partners and the firm. For criminal liability other than fine, the proviso limits such liability to the concerned partner or partners who acted fraudulently, abetted or colluded in the fraud.
Quick compliance summary
| Provision | Core requirement | Key consequence |
|---|---|---|
| Section 145 | Auditor signs audit report or specified documents; adverse qualifications, observations or comments in the audit report are placed before the general meeting and open to member inspection. | Contravention by an auditor can attract Section 147(2). |
| Section 146 | General-meeting notices and communications go to the auditor; attendance is required unless exempted; auditor has a right to be heard on relevant business. | Contravention falls within Section 147(1). |
| Section 147 | Provides fines and other consequences for specified audit-related defaults. | Consequences depend on the person in default and whether deception was knowing or wilful. |
Official resources and related provisions
For the authoritative statutory text and subsequent amendments, refer to the Ministry of Corporate Affairs - Companies Act, 2013 and the India Code portal. Readers should also consider the connected provisions on appointment and eligibility of auditors, powers and duties of auditors, prohibited non-audit services and other provisions in Chapter X.
This article is a general statutory overview. For a transaction, proceeding, prosecution or compliance decision, the current Act, applicable rules, notifications and case law should be checked for the relevant date and facts.