Section 143(3)(i) Companies Act 2013 reporting on Internal audit by Auditor :clarification


Section 143(3)(i) Companies Act 2013 reporting on Internal audit by Auditor :clarification

We all know that the Companies Act, 2014 has come into force. But till now only few sections are made applicable and applicability of remaining sections are still pending. Applicability of such sections is communicated via notification from the Ministry of Corporate Affairs of India. There are certain provisions of the Companies Act, 2013 the applicability of which is decided by the Institute of Chartered Accountants of India. Applicability of one of such sections was announced by the Institute of Chartered Accountants of India and the same of Section 143(3)(1) of the Companies Act, 2013.

Section 143(3)(1) read with the applicable rules of the Companies Act, 2013 contains the provisions applicable to the auditor of the company. The section states the requirement that the auditor is supposed to report about whether there is sufficient internal financial control system in the company and the same has been operated efficiently or not.

The applicability of Section 143(3)(1) along with the rules was decided by the Institute of Chartered Accountants of India in its adjourned 333rd meeting which was held on 18th day of June, 2014. The applicability of section 13(3)(1) along with the rules was announced by the Institute of Chartered Accountants of India. The notification stated that, section 143(3)(1) along with the rules will be enforced from the financial years beginning from 1st April, 2014.


It was further clarified that, the auditor of the company is required to report about the adequacy of the financial controls in the company along with efficiency of application of the same. The reporting of the same will be required to be done from the financial year commencing from 1st April, 2014. The clarification was also made to this regards that, the provisions of section 143(3)(1) and the rules thereof will not be applicable for any financial period commencing before 1st April, 2014.

The provisions of section 143(3)(1) and the rules thereof will not be applicable to the financial year beginning on or before 31st of March, 2014. In the case were the financial year has commenced before 31st March, 2014 but the audit for the said period is carried out after 1st April, 2014 and the report is issued after 1st April, 2014 by the auditor, the rules of section 143(3)(1) will not be applicable for the company.

In another words the applicability of section 143(3)(1) and the rules to section 143(3)(1) would be applicable only to the audits to be done for the financial period commencing on or after 1st April, 2014. Further announcement of applicability of various sections will be notified by the Ministry of Corporate Affairs of India and the Institute of Chartered Accountants of India along with the rules applicable to it and clarifications required to easily understand the said provisions and for enabling smooth application of the provisions. This will reduce the chances of sabotage by finding loopholes in the provisions and this will ultimately safeguard the companies in India.


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