Section 144: Auditor not to render certain services
This section restricts the services that an auditor can provide to a company to prevent conflicts of interest and ensure auditor independence.
The section, clause by clause
What the section says
In plain terms
An auditor appointed under this Act shall provide to the company only such other services as are approved by the Board of Directors or the audit committee, as the case may be, but which shall not include any of the following services (whether such services are rendered directly or indirectly to the company), or its holding company or subsidiary company, namely:—
(a)accounting and book keeping services;
(b)internal audit;
(c)design and implementation of any financial information system;
(d)actuarial services;
(e)investment advisory services;
(f)investment banking services;
(g)rendering of outsourced financial services;
(h)management services; and
(i)any other kind of services as may be prescribed:
provisoProvided that an auditor or audit firm who or which has been performing any non-audit services on or before the commencement of this Act shall comply with the provisions of this section before the closure of the first financial year after the date of such commencement.
explanationExplanation.—For the purposes of this sub-section, the term “directly or indirectly” shall include rendering of services by the auditor,—
(i)(i)in case of auditor being an individual, either himself or through his relative or any other person connected or associated with such individual or through any other entity, whatsoever, in which such individual has significant influence or control, or whose name or trade mark or brand is used by such individual;
(i)(ii)in case of auditor being a firm, either itself or through any of its partners or through its parent, subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Ins. by notification No. S.O. 1226(E), dated 29th March, 2016 (w.e.f. 10-4-2015).
- 2. Subs. by Act 21 of 2015, s. 13, for sub-section (12) (w.e.f. 14-12-2015).
- 3. Subs. by Act 1 of 2018, s. 43, for “cost accountant in practice” (w.e.f. 9-2-2018).
- 4. Subs. by Act 29 of 2020, s. 30, for sub-section (15) (w.e.f. 21-12-2020).
- 1. The words “with imprisonment for a term which may extend to one year or” omitted by Act 29 of 2020, s. 31 (w.e.f. 21-12- 2020).
- 2. Subs. by s. 31, ibid., for “one lakh rupees, or with both” (w.e.f. 21-12-2020).
- 3. Ins. by Act 1 of 2018, s. 44 (w.e.f. 9-2-2018).
- 4. Subs. by Act 1 of 2018, s. 44, for “and with fine which shall not be less than one lakh rupees but which may extend to twenty- five lakh rupees” (w.e.f. 9-2-2018).
Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.