Section 378ZG: Duties of Auditor of a Producer Company

What is section 378ZG?

Section 378ZG - Duties of auditor under this Chapter applies to a Producer Company under Chapter XXIA of the Companies Act, 2013. It requires the auditor to report on specific additional subjects. Its opening words, without prejudice to the provisions contained in section 143, mean that the ordinary auditor reporting obligations under the Companies Act, 2013 continue to apply.

The provision was inserted by section 52 of the Companies (Amendment) Act, 2020 and took effect on 11 February 2021. It complements the accounting, internal audit and governance requirements applicable to Producer Companies.

Additional reporting duties under section 378ZG

The auditor shall report on all the following matters, corresponding to clauses (a) to (g) of the section:

Clause (a): Debts and bad debts

Report the amount of debts due, with particulars of bad debts, if any. This includes identifying debts outstanding and disclosing amounts considered bad.

Clause (b): Verification of cash and securities

Report on verification of cash balance and securities. The audit should address the existence and verification of cash and securities recorded by the Producer Company.

Clause (c): Assets and liabilities

Report details of the assets and liabilities of the Producer Company, taking account of the supporting accounting records.

Clause (d): Transactions contrary to Chapter XXIA

Identify and report all transactions that appear contrary to the provisions of Chapter XXIA, which specifically governs Producer Companies. The statutory wording is concerned with transactions that appear inconsistent with the Chapter.

Clause (e): Loans to directors

Report loans given by the Producer Company to its directors. This is an additional reporting requirement; it does not itself authorise a loan otherwise restricted by applicable law.

Clause (f): Donations and subscriptions

Report donations or subscriptions made by the Producer Company. Section 378ZH deals specifically with donations or subscriptions by Producer Companies.

Clause (g): Other necessary matters

Report any other matter considered necessary by the auditor. This clause preserves the auditor's professional judgment to draw attention to additional relevant matters.

How section 378ZG works in practice

The seven items are additional audit-reporting subjects, not a replacement for the audit under section 143. In practice, an auditor should evaluate the Producer Company's books and supporting evidence, including debt schedules, cash and securities records, asset and liability registers, board approvals, director-loan records and donation or subscription details.

Management and the Board remain responsible for maintaining proper books and records. The auditor independently examines the relevant evidence and reports in accordance with the applicable statutory audit framework. Section 378ZG does not prescribe a separate filing deadline or a separate audit appointment process.

Connected provisions of the Companies Act, 2013

• Section 143: General powers and duties of auditors and auditing standards; these obligations continue alongside section 378ZG.
• Section 378ZE: Books of account to be maintained by a Producer Company, including receipts, expenditure, purchases, sales, liabilities, assets and certain production costs.
• Section 378ZF: Internal audit of Producer Companies.
• Section 378ZH: Donations or subscriptions by a Producer Company.
• Section 378ZM: Penalty for contravention of provisions of Chapter XXIA, where applicable.

Official legislation and regulatory resources

For the operative statutory text, amendments, commencement notifications and filing requirements, consult the Companies Act, 2013 on India Code and the Ministry of Corporate Affairs (MCA). The relevant Chapter XXIA provisions were inserted through the Companies (Amendment) Act, 2020.