Non-audit Services that company auditor can not render to a company – Companies act 2013

A company auditor who is appointed under section 139 of companies act 2013 shall provide only those services that are not disallowed under section 144 of companies act 2013.

Companies act 2013 has introduced a new concept by including certain non-audit services to the list which a company auditor can not render to the company in which he or the CA firm is appointed as auditor.

Non-audit Services that company auditor can not render

As per section 144 of companies act 2013, a company auditor shall provide those services that are approved by the board of directors or the audit committee of the company. However, this section 144 also prohibits certain non-audit services which a company auditor can not perform after being appointed as company auditor.

Here are the non-audit services which a company auditor can not perform;

  1. accounting and book keeping services
  2. internal audit
  3. design and implementation of any financial information system
  4. actuarial services
  5. investment advisory services
  6. investment banking services
  7. rendering of outsourced financial services
  8. management services and
  9. any other kind of services as may be prescribed

Section 144 also prohibits a company auditor from offering above non-audit services whether directly or indirectly to the company or its holding company or subsidiary company.

As per the explanation to section 144 of companies act 2013, the term directly or indirectly shall include rendering of services by the auditor;

  • 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;
  • in case of auditor being a firm, either himself 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

In the last No.9 “any other kind of services as may be prescribed” category, government has also kept the option open to add additional services in future to check any conflict of interest which leads to a potential fraud. If any other services are prescribed then that will also be included in this section and company auditor can not render such services.

If any auditor or audit firm who or which has been performing any of the above non audit services as mentioned above on or before commencement of this act then provisions of this section shall be complied before closure of the first financial year after the date of such commencement.

5 thoughts on “Non-audit Services that company auditor can not render to a company – Companies act 2013

  1. Suresh

    How about VAT Audit, Tax Audit and other certification works. Is it allowed under companies act 2013. Can our firm being a statutory auditor of a company render such type of services to the same company for which we are appointed as company auditor under section 139.

    Reply
    1. YFB

      Yes, you can do tax audit or vat audit or both of your company in which you are appointed as company auditor under section 139 of Companies Act 2013. This section has no restriction on rendering attest services.

      Reply
  2. dhan

    Can a firm of CA, wherein one of the Director of the company , be appointed for rendering any of the Non Audit services , like management services, financial services, Accounting services etc

    Reply
  3. dhan

    Can a Firm of CA, wherein one of the Director of the company, is also partner of the firm be appointed for rendering any of the Non Audit services, like management services, financial and investment services or accounting services etc. If the Company is private Ltd company, will the related party transaction provisions apply in such cases.

    Reply

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