Approval and prohibition are separate tests
Companies Act, 2013 section 144 permits the appointed auditor to provide only such other services as are approved by the Board or audit committee, as applicable, and excludes the listed prohibited services. Approval does not override that exclusion. Check both gates before accepting an engagement or asking management to approve a combined fee proposal. This guide is checked on 25 October 2026 and concerns company statutory auditors under this provision. The illustrations screen the expressly listed services for a serving statutory auditor. They do not establish permission for post-tenure engagements or decide additional restrictions for particular prescribed classes; those require the applicable enacted text, commencement and rules.
Read the actual scope of work
The statutory list includes accounting and bookkeeping, internal audit, design and implementation of financial information systems, actuarial services, investment advisory, investment banking, outsourced financial services, management services and any other prescribed services. Calling bookkeeping “closing support” does not change what the team actually does. Separate audit evidence gathering from preparing the client’s records or taking management decisions.
An engagement assessment should identify deliverables, who creates or changes the ledger, who approves entries, who owns system design decisions and whether the auditor will later audit its own work. A legal service classification cannot be decided just by dividing fees into different invoice headings. Where scope is unclear, obtain enough detail to decide it before work starts; do not treat ambiguity as automatic permission.
Map the recipients and delivery entities
The prohibition expressly addresses services rendered directly or indirectly to the company, its holding company or subsidiary. The explanation expands indirect delivery: for an individual auditor it includes specified relatives, associated persons and influence/control or named-brand entities; for a firm it includes partners, parent, subsidiary or associate entities and the other specified influence/control or brand circumstances. A second legal entity or invoice does not by itself bypass the restriction.
Prepare a group-recipient and provider-relationship register. Distinguish an entity that falls within the statutory explanation from an unrelated provider genuinely outside it, while separately considering other applicable independence requirements. Section 144 is not a complete substitute for ICAI ethical standards or other regulatory requirements. An engagement not expressly named in the list is not automatically approved or otherwise permitted.
Separate the audit engagement from unresolved non-audit work
For each proposal line, record the actual service, recipient, provider, statutory result and other required review. Obtain the relevant approval only for work that survives the prohibition and other applicable requirements. If a bundled scope contains prohibited activity, changing the fee label or reducing the amount does not cure it. Review standing contracts and new change requests as well as new appointments.
The examples use fictional fees only to reconcile the screening population. They do not prescribe a permissible fee ratio, a de minimis exemption or an actual independence opinion. No GST, penalty or fee-recovery consequence is calculated. The correct conclusion depends on the real work and relationships.
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Separate audit and bookkeeping
A proposal contains statutory audit ₹3,00,000 and bookkeeping ₹1,00,000 for the audit client. Total ₹4,00,000 comprises ₹1,00,000 identified prohibited non-audit work on these facts; Board approval of ₹4,00,000 does not cure that line.
Illustrative example 2: A smaller fee is still screened
An internal-audit proposal is reduced from ₹1,50,000 to ₹50,000, a reduction ₹1,00,000. Internal audit remains on the statutory list; the reduction creates no section 144 monetary exemption.
Illustrative example 3: Check a subsidiary recipient
The appointed auditor’s proposal lists client internal audit ₹80,000 and subsidiary bookkeeping ₹60,000. Both recipients and services fall within the stated prohibition, giving ₹1,40,000 of identified prohibited scope on these facts.
Illustrative example 4: Indirect delivery is not removed from the register
Assume a provider is established to fall within the firm-auditor explanation through control and proposes ₹2,00,000 financial-system design for the audit client. The directly billed firm amount may be nil, but the ₹2,00,000 scope remains in the indirect-service assessment.
Illustrative example 5: Reconcile work packages
Six non-audit work packages are examined. Four are established prohibited services and two require further ethical and approval review. The tracker shows four prohibited and two unresolved; it does not call the remaining two automatically permissible.
Illustrative example 6: Do not net unrelated commercial items
A ₹1,20,000 prohibited bookkeeping scope is combined with a ₹20,000 commercial discount against total fees. The invoice net may change, but the underlying ₹1,20,000 service classification is not eliminated by the discount.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the appointed auditor | Appointment and engagement identity. |
| 2 | Inventory other services | Proposals, standing contracts and change requests. |
| 3 | Classify substantive deliverables | Who performs bookkeeping, system design or management work. |
| 4 | Map recipient companies | Client, holding and subsidiary records. |
| 5 | Identify the actual provider | Firm, partner, relative or connected delivery entity. |
| 6 | Apply the indirect-service explanation | Control, association and relevant brand facts. |
| 7 | Exclude prohibited scope | Documented service-by-service conclusion. |
| 8 | Review other independence requirements | Applicable professional and regulatory analysis. |
| 9 | Obtain required approval | Board or audit-committee evidence for eligible work. |
| 10 | Monitor subsequent changes | New services, provider changes and periodic engagement review. |
Sixteen practitioner FAQs
1. Can Board approval override a listed prohibition?
No. Approval and the exclusion operate as separate tests.
2. Does bookkeeping have a small-fee exemption in section 144?
Do not invent a monetary safe harbour from the text.
3. Is internal audit listed?
Yes. Screen the appointed auditor’s proposed role accordingly.
4. Does renaming work as support settle classification?
No. Examine actual deliverables and responsibility.
5. Is financial-system design and implementation relevant?
It is expressly included in the statutory list.
6. Can the holding or subsidiary recipient be ignored?
No. The section expressly extends to those recipients.
7. Does a separate provider invoice automatically solve the issue?
No. Apply the indirect-service explanation.
8. Are firm partners within the explanation?
Yes. The firm limb expressly includes delivery through partners.
9. Should controlled delivery entities be examined?
Yes. Establish the actual statutory relationship facts.
10. Does every shared commercial connection necessarily prove the explanation?
Do not guess; verify the precise influence, control, association or brand circumstances.
11. Does absence from the express list guarantee permission?
No. Required approval and other applicable independence rules still matter.
12. Can tax advisory be automatically approved from its label?
No. Assess the actual scope and all applicable requirements.
13. Is a fee ratio prescribed by these examples?
No. Fees measure the screened population, not a permissible independence ratio.
14. Can a discount remove prohibited activity?
No. Commercial pricing does not change service substance.
15. Should only new proposals be reviewed?
Include continuing contracts and scope changes.
16. What evidence supports acceptance?
A service, recipient and provider analysis, other independence checks and the relevant approval for eligible work.
Conclusion
Board or audit-committee approval cannot make a section 144 prohibited service permissible. Screen the service substance, recipient group and direct or indirect delivery before separating eligible engagements from prohibited work.