Section 143(3) of the Companies Act requires the auditor's report to state, among other matters, whether proper books of account have been kept, whether the balance sheet and profit and loss account are in agreement with the books, whether the financial statements comply with the applicable accounting standards, whether any director is disqualified from being appointed as a director, and an opinion on the adequacy and operating effectiveness of the company's internal financial controls over financial reporting, along with any observations having an adverse effect on the functioning of the company; section 143(12) separately requires reporting suspected fraud involving a specified amount directly to the Central Government, or below that amount to the audit committee or board; the exact wording and current thresholds should be confirmed against the current Act.
Matters reported under section 143(3)
| Matter | What is tested |
|---|---|
| Information and explanations sought | Whether the auditor obtained all information and explanations considered necessary; a refusal or a materially delayed response is itself reported |
| Proper books of account | Whether books, including relevant records and returns adequate for the audit, have been kept by the company and by branches not visited |
| Branch audit reports | Whether branch reports were received and properly dealt with in preparing the auditor's report |
| Agreement with books | Whether the balance sheet, profit and loss account and cash flow statement are in agreement with the books of account and returns |
| Compliance with accounting standards | Whether the financial statements comply with the accounting standards notified under the Act |
| Director disqualification | Whether any director is disqualified under section 164(2), tested against each director's own disclosures and available disqualification databases |
| Qualifications, reservations or adverse remarks | Any such observations on accounts maintenance and relevant financial transactions or matters, with their impact quantified where possible |
| Internal financial controls | An opinion on the adequacy of internal financial controls over financial reporting and the operating effectiveness of such controls |
| Other prescribed matters | Includes pending litigation disclosure, provision for foreseeable losses on long-term contracts, delay in transferring amounts to the Investor Education and Protection Fund, and other matters prescribed by rule from time to time |
Fraud reporting under section 143(12)
Where, in the course of performing duties as auditor, the auditor has reason to believe that an offence involving fraud is being or has been committed against the company by its officers or employees, the auditor reports the matter to the Central Government if the amount involved is at or above a prescribed threshold, within a prescribed timeline and in a prescribed manner, and reports to the audit committee or board if the amount is below that threshold. This reporting obligation is distinct from CARO's own fraud-related reporting point and from the auditor's communication obligations under the engagement standards; all three can apply to the same fact pattern and each needs its own documented conclusion.
A suspicion that falls short of 'reason to believe' at the time it is first noticed does not relieve the auditor of monitoring it as evidence accumulates during the engagement; the threshold for reporting is reassessed, not fixed at the point of first observation.
Regulatory requirement
The exact list of matters under section 143(3), the prescribed rules expanding that list, and the fraud reporting thresholds and timelines under section 143(12) are set out in the Companies Act and its rules as currently in force. Confirm all of these against current source material before drafting the report.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit workflow & automationSA 700: forming an opinion, and what "true and fair" actually requires concluding onFinishing every planned procedure isn't the same as forming an opinion. SA 700 is the step that happens after the checklist, not instead of it.
- Internal audit & IFCIFC testing: internal financial controls over financial reportingHow IFC testing differs from a substantive statutory audit, what design versus operating effectiveness testing actually means in practice, and what the file needs to show for each.
- Internal audit & IFCFraud risk assessment: building it into the audit planThe fraud triangle applied practically rather than as theory, why management override is a presumed risk on every engagement, and what journal entry testing is actually looking for.
- CARO & Companies ActCARO 2020 reporting checklist for statutory auditorsThe topic areas CARO reporting covers, what evidence each one needs, and how the clauses fit together across the audit file.
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