Company Audit
Juro Legal LLP provides Company Audit services since 2009. Our experienced team ensures thorough and compliant audits, helping businesses maintain transparency and meet regulatory requirements efficiently.
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In most instances, companies get audited when there’s an interested external party that wants to ensure that their accounting records are properly kept or that the financial statements are a true reflection of the company’s performance.
These external parties are mostly lenders (if you have a loan, most lenders—especially banks—require audited financial statements) and, in some instances, investors. Other instances in which audited financial statements are required are purely regulatory. For example, some industries—mainly financial services: broker-dealers, banks and other lending companies—require audited financial statements. All public companies are required to be audited.
After registering a private limited company, there are many compliances that the company has to follow under the Companies Act, 2013 (‘Act’). One such mandatory requirement a company must follow is to conduct an audit irrespective of its turnover or nature.
A company audit means the inspection of its books of account to ensure that they are correct. The company must appoint an auditor to conduct the audit. The objective of an audit of the company’s financial statements is to allow the auditor to express his/her opinion.
The auditor will have to check various books of accounts, vouchers and bills to check if they are accurate and properly maintained. The audit of a private limited company is an annual compliance requirement under the Act and Company Law Rules.
There are different types of audits of a private limited company carried out for various purposes. A few important types of audit of a private company are as follows:
Statutory Audit
The statutory audit is a mandatory audit that every private limited company must conduct irrespective of its profit or turnover. A company incurring loss must also conduct a statutory audit. Every private limited company must compulsorily get their annual accounts audited each financial year as per the Act and the Companies (Accounts) Rules, 2014.
The objective of the statutory audit is to determine if a company is providing an accurate representation of its financial situation after examining the information in the books of account, bank balance and financial statements.
Internal Audit
The internal audit of the private limited company is conducted as per the suggestion of its internal management. The Act and the Companies (Accounts) Rules, 2014, provides that the prescribed companies must appoint an internal auditor to conduct an audit of their activities and functions. The prescribed private limited companies that need to conduct internal audits are:
- Private companies having a turnover of Rs.200 crore or more during the previous financial year
- Private companies having outstanding borrowings or loans from Public Financial Institutions or banks exceeding Rs.100 crore or more
Internal audits are done to check the status of the company’s finances and analyse its operational efficiency. They help the internal management review the finances and make the required changes to increase efficiency in its operations.
Cost Audit
The Companies (Cost Records and Audit) Rules, 2014 prescribes that the following private limited companies must perform cost audit:
- Private limited companies engaged in the production of goods or providing services listed in table 3(A) of the Companies (Cost Records and Audit) Rules and having:
- An annual turnover in the previous financial year of Rs.50 crore or more from all its services or products
- An aggregate turnover of the individual service or product of Rs.25 crore or more
- Private limited companies engaged in the production of goods or providing services listed in table 3(B) of the Companies (Cost Records and Audit) Rules and having:
- An annual turnover in the previous financial year of Rs.100 crore or more from all its services or products
An aggregate turnover of the individual service or product of Rs.35 crore or more
Statutory Audit: The statutory audit must be done before the AGM of the company is conducted. The statutory auditor needs to submit the audit report to the board before the conduct of AGM. The audit report should be attached with the company’s financial statements and filed with the ROC. The due dates are as follows:
- The audit report must be attached to Form AOC-4(financial statement) and filed with the ROC within 30 days of the AGM.
- The form MGT-7(annual return of the company) must be filed within 60 days of the AGM.
- The due date for holding AGM is before or on 30 September every year.
Internal Audit: There is no due date for conducting the internal audit. The internal auditor is required to submit a report to the board before the conduct of AGM. The auditor’s report must be filed together with Form AOC-4.
Cost Audit: The cost audit report is to be submitted to the board within 30 September every year in form CRA-3. After receiving the cost audit report, the board will consider and examine the cost report. The board must submit the cost audit report with relevant information to the Central Government within 30 days of receiving the cost audit report in form CRA-4.
ROC forms that a private limited company must file in relation to the audit requirements are as follows:
Forms | Purpose of the Form |
Form ADT-1 | Appointment of company auditor |
Form AOC-4 | Annual filing of company financial statements |
Form MGT-7 | Filing of company annual return |
Form CRA-2 | Appointment of cost auditor |
Form CRA-3 | Submission of cost audit records to the board |
Form CRA-4 | Filing of cost audit report |