A common misconception is that a company’s auditor must sign its financial statements, but this is not required under law. The Companies Act, 2013, particularly Section 134, clearly places responsibility for approving and signing financial statements on the Board of Directors and key managerial personnel such as the Managing Director, CEO, CFO, and Company Secretary. The auditor’s name does not appear in this provision, confirming that auditors have no legal obligation to sign the statements. As per ICAI Standards on Auditing, the auditor’s role is limited to examining the financial statements and expressing an independent opinion by signing the audit report. Judicial precedents have consistently reinforced this distinction, holding that preparation and signing of accounts is a management function, while auditing is confined to verification and reporting. Practically, unsigned financial statements by directors are invalid, but the absence of the auditor’s signature on the financial statements does not affect their validity.
What the Law Says – Section 134 of the Companies Act, 2013
Section 134 clearly states that the financial statements must be approved by the Board of Directors and signed by:
- The Chairperson, if authorised, or
- At least two directors (one of whom must be the Managing Director, if any), and
- The CEO, CFO and Company Secretary, wherever appointed.
The auditor’s name is not mentioned anywhere in this section.
This clearly shows that there is no legal requirement for a CA to sign the financial statements.
Role of the Auditor as per ICAI
According to ICAI Standards on Auditing:
- The auditor’s duty is to examine the financial statements.
- After examination, the auditor must express his opinion by signing the audit report.
- ICAI does not require the auditor to sign the financial statements.
In fact, if an auditor signs the financial statements, it may create confusion between the role of management and the role of the auditor.
Reference of Case Laws
Deputy Secretary to the Government of India v. S. N. Das Gupta (1956)
The Supreme Court held that:
- The auditor’s job is to check the accounts and submit a report.
- The auditor is not responsible for preparing or signing the financial statements.
ICAI v. P. K. Mukherjee (1968)
The Supreme Court observed that:
- Preparation and signing of accounts is the responsibility of management.
- The auditor’s role is limited to verification and reporting.
Practical Understanding
- Directors and key managerial personnel must sign the financial statements.
- Auditor must sign the audit report.
- Auditor not need to sign on the financial statements.
Unsigned financial statements by directors are invalid, but absence of auditor’s signature on financial statements does not affect their validity.
Conclusion:
A Chartered Accountant, acting as an auditor, is not required to sign the financial statements of a company. Section 134 of the Companies Act, 2013 clearly places this responsibility on the Board of Directors and key managerial personnel. The auditor’s responsibility ends with signing the audit report, not the financial statements.
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