A government company (the legal form most public sector undertakings take) is audited by a statutory auditor appointed by the Comptroller and Auditor General (CAG), not by its members. The CAG can direct how the audit is done, add to the auditor's report within 60 days, and order a separate test audit. The rules are in sections 139, 143(5), 143(6) and 143(7) of the Companies Act, 2013.
Last reviewed: 17 October 2026. Facts checked. We opened a lawx.in page reproducing section 143(5) to (7) of the Companies Act, 2013, which is a secondary site, not the government's own text. We read CAG audit report prefaces and chapters through search results for section 139(5) and the 180-day period. A CAG page on Section 19A and the audit provisions of the 1971 Act was opened on cag.gov.in. We did not open the Act on the Ministry of Corporate Affairs site, and we did not check the Ministry's 2014 removal-of-difficulties order beyond a search summary. Confirm against the official text before formal use.
What counts as a government company
The Companies Act defines a government company; we did not open that definition, so read it for your case. "PSU" is a common name, and Central PSUs are often called CPSEs. The Companies Act also speaks of "government controlled" companies. A search found that the Ministry issued a 2014 removal-of-difficulties order because of a drafting gap in how section 143(5) reached companies owned or controlled by governments. Read the current wording of the Act and any orders before relying on this for an engagement.
Step 1: The CAG appoints the auditor
Section 139(5) says that for a government company, the CAG appoints the statutory auditor for each financial year. CAG reports describe the timing as within 180 days of the start of the financial year. For the first auditor, section 139(7) gives the CAG 60 days from registration. If the CAG does not act in that time, the board appoints within the next 30 days, and failing that the members decide at a general meeting. These two timing points come from CAG reports, not the statute text.
The appointment is made by the CAG's office, and the company's members do not vote on it. How private companies do it is in auditor appointment, tenure and rotation.
Step 2: Directions under section 143(5)
The CAG also directs the manner in which the accounts are to be audited. The auditor then sends the CAG a report on the action taken on the directions and their effect on the accounts and financial statements.
Step 3: The statutory audit
The statutory auditor does the usual audit and signs a report. The duties and powers of any company auditor are in section 143 powers and duties.
Step 4: Supplementary audit and comments under 143(6)
Within 60 days of receiving the audit report, the CAG may:
- carry out a supplementary audit through persons it authorises, and require information in the form it directs, or
- comment upon, or supplement, the audit report.
The company must send any CAG comments to everyone entitled to the audited financial statements under section 136(1), and place them before the annual general meeting with the auditor's report.
Step 5: Test audit under 143(7)
Separately, where the CAG thinks it necessary, it may order a test audit of the company's accounts. Section 19A of the 1971 Act applies to that report. A CAG page says reports under Section 19A go to the department Secretary, who lays them before the legislature.
The timeline at a glance
| When | What |
|---|---|
| Within 180 days of year start (per CAG reports) | CAG appoints statutory auditor, section 139(5) |
| During the audit | CAG directions to the auditor, section 143(5) |
| After audit report is received | 60 days for CAG supplementary audit or comments, section 143(6) |
| Any time the CAG considers necessary | Test audit, section 143(7) |
| At the AGM | Auditor's report and any CAG comments placed before members |
What this means for the finance team
- Expect two audiences for the audit: the statutory auditor and the CAG's office.
- Plan time for the 60-day window after the auditor's report before the AGM.
- Keep a record of CAG directions and the auditor's replies on them.
- Treat CAG comments as part of the annual report pack.
How it differs from other audits
Government companies are audited under company law, so the output is still the auditor's report on the financial statements. The CAG layer adds oversight. See government audit vs private sector audit and the CAG's role.
Frequently Asked Questions
Who audits a PSU?
A statutory auditor appointed by the CAG under section 139(5) of the Companies Act, 2013, for government companies. The CAG can also supplement the audit.
What is a supplementary audit?
An additional audit by persons authorised by the CAG, which can be carried out within 60 days of the CAG receiving the auditor's report, under section 143(6).
Do the members appoint the auditor of a government company?
No. For a government company, the CAG appoints the statutory auditor.
What is a test audit under section 143(7)?
An audit the CAG may order when it considers it necessary. Section 19A of the 1971 Act applies to the report.
Are all PSUs companies?
No. Some bodies are statutory corporations set up by their own laws and are audited under those laws. A CAG page notes that corporations are audited under their own enabling Acts.
Related Articles
Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error