Section 142 Remuneration of auditors – Companies Act 2013

Amended and updated notes on section 142 of Companies Act 2013. Detail discussion on provisions and rules related to remuneration of auditors.

Amended and updated notes on section 142 of Companies Act 2013. Detail discussion on provisions and rules related to remuneration of auditors.

Chapter X (Sections 139148) of the Companies Act, 2013 (CA 2013) deals with the provisions related to audit and auditors. Section 142 of CA 2013 provides for remuneration of auditors.

Recently, we have discussed in detail section 141 (Eligibility, qualifications and disqualifications of auditors) of CA 2013. Today, we learn the provisions of section 142 of Companies Act 2013.

The provisions of section 142 are effective from 1-April-2014. You may refer Notification No. S.O. 902(E) issued dated 27.03.2014. This section corresponds to section 224 of the Companies Act, 1956 i.e. appointment and remuneration of auditors. In this article, you will learn detail of the provisions of section 142 of the Companies Act 2013 read with the Companies (Audit and Auditors) Rules, 2014.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.X
Chapter NameAudit and Auditors
Section No.142
Section NameRemuneration of auditors
Monthly Updated EditionCompany Law PDF

Fixing Remuneration of Auditors of a Company [Section 142(1)]

As per the provisions of section 142(1) of the Companies Act, 2013, the remuneration of the auditor of a company shall be fixed in its general meeting or in such manner as may be determined therein.

However, the remuneration of First Auditor appointed under section 139 by the Board of Directors (BOD) of the company shall be fixed by the Board itself.

Payment of Fee and Expenses included in Remuneration of Auditors [Section 142(2)]

According to the provisions of sub-section (2) of section 142 of CA 2013, the aforesaid remuneration shall be in addition to the fee payable to an auditor. The remuneration shall:

1) Include: Remuneration of Auditor include the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility extended to him.

2) Exclude: Remuneration of Auditor does not include any remuneration paid to him for any other service rendered by him at the request of the company.

Disclosure Requirement of Amount paid to Auditors [Schedule III]

In compliance with Paragraph 5 “Additional Information” of general instructions for preparation of statement of profit and loss (P/L) of PART-II of Schedule-III of the Companies Act, 2013, a Company shall disclose by way of notes additional information regarding aggregate expenditure on the following items:

Payments to the auditor as

  • (a) auditor;
  • (b) for taxation matters;
  • (c) for company law matters;
  • (d) for management services;
  • (e) for other services; and
  • (f) for reimbursement of expenses.

Thus, any amount paid to auditors of a company shall be disclosed by way of additional notes. In other words, it is mandatory to disclose in the P/L the detailed information in regard to payments made to the auditor whether as fees, expenses or otherwise for services rendered.

Penalties for contravention of Section 142 [Section 147(1)]

If any of the provisions of section 142 related to remuneration of Auditors is contravened, the following person shall be punishable:

1) Company: The Company shall be punishable with fine between ₹25 thousands and ₹5 lakhs; and

2) Officers: Every officer of the company who is in default shall be punishable with

i) Imprisonment for a minimum term of 1 Day and maximum term of 1 year; or
ii) With a minimum fine of ₹10000 and Maximum fine up to ₹100000; or
iii) With both.

Section 142 of Companies Act 2013: Remuneration of auditors

Section 142 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.

(1) The remuneration of the auditor of a company shall be fixed in its general meeting or in such manner as may be determined therein:

Provided that the Board may fix remuneration of the first auditor appointed by it.

(2) The remuneration under sub-section (1) shall, in addition to the fee payable to an auditor, include the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility extended to him but does not include any remuneration paid to him for any other service rendered by him at the request of the company.

Open Demat Account

For Investing or Trading

(Best Investing and Trading Platform in India)

Learn More