What is Statutory Audit?
A statutory audit is a legally required, independent examination of a company's books and financial statements by a qualified chartered accountant. The auditor gives an opinion on whether the accounts show a true and fair view. Companies must have a statutory audit every year, and certain LLPs and entities need one too.
Who needs it
- Every company registered under the Companies Act, including private limited companies and OPCs, regardless of turnover.
- LLPs whose turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh.
- Co-operative societies, trusts and other entities where audit is required under their governing law.
- Businesses that need audited accounts for bank loans, investors or tenders.
- Companies that have outgrown a part-time or informal auditor.
Benefits
- Audited financial statements that meet legal requirements and are accepted by banks and investors.
- Independent review of accounting policies, compliance with accounting standards and disclosures.
- Early identification of control gaps and compliance risks.
- Smooth ROC filing, since audited accounts are the base for AOC-4.
- Practical management letter with improvement suggestions.
What the auditor reports
The audit report states whether the financial statements give a true and fair view. Companies also receive additional reporting: the Companies (Auditor's Report) Order covers matters such as fixed assets, inventories, loans, statutory dues and fraud, and larger companies get an opinion on the adequacy of internal financial controls.
| Type of opinion | When it is given |
|---|---|
| Unmodified | The statements are free from material misstatement |
| Qualified | Material misstatement in specific areas, but not pervasive |
| Adverse | Misstatements are material and pervasive |
| Disclaimer | The auditor could not obtain enough evidence to form an opinion |
Most well-run businesses receive an unmodified opinion. An early discussion of issues usually allows them to be fixed before the report is issued.
How to prepare so the audit runs quickly
Most of the elapsed time in an audit is spent waiting for records, so the largest saving comes from closing the books and assembling the schedules before the auditor starts rather than during the fieldwork.
- Close the books and reconcile bank, GST and TDS before the audit starts.
- Prepare schedules of debtors, creditors, loans, fixed assets and provisions.
- Collect balance confirmations from major parties.
- Keep minutes, registers and statutory filings together.
- Name one person as the contact for the auditor's queries.
After the audit
Once the report is signed, the board approves the financial statements, which are then placed before the members at the AGM. The audited statements are filed with the Registrar, and the same numbers go into the income tax return. A short debrief with the auditor about weak controls and next year's calendar turns the audit into an improvement exercise.
Common questions
Three questions come up on most engagements: changing the auditor, disagreeing with an adjustment, and how long the papers are kept.
- Can we change the auditor? Yes, by following the process in the Companies Act, which includes resignations and appointments with filings.
- What if we disagree with an audit adjustment? Discuss it with the auditor, provide evidence, and if the point remains open the auditor may qualify the report.
- How long are audit papers kept? Auditors keep them as per the professional standards; companies keep the books for the periods the law requires.
Official sources: Sections 139 to 148 of the Companies Act, 2013 and the Standards on Auditing issued by the ICAI.
Documents required
- 01Trial balance, general ledger and books of account
- 02Bank statements, loan statements and confirmations
- 03Fixed asset register and depreciation workings
- 04Sales and purchase registers, GST returns and reconciliations
- 05TDS returns, challans and Form 26AS
- 06Payroll records, PF and ESI returns
- 07Debtors and creditors lists with confirmations
- 08Minutes of board and general meetings, statutory registers
- 09Prior year audited financial statements and audit report
Due dates and penalties
| Item | Due date | If missed |
|---|---|---|
| Appointment of auditor and filing ADT-1 | Within 15 days of the AGM at which the appointment is made | Late fee and penalty under the Companies Act |
| Audit completed and financial statements approved by board | Before the AGM | Delay in AGM and ROC filings |
| Annual General Meeting | Within 6 months of financial year end (30 September) | Penalty on the company and officers |
| Filing of AOC-4 | Within 30 days of the AGM | Additional fee of ₹100 per day |
First auditors are appointed by the board within 30 days of incorporation. We guide you on the correct appointment route.
Mistakes to avoid
- Starting the audit late, so the AGM and ROC filings slip.
- Keeping books incomplete until year end, forcing long audit queries.
- Not reconciling GST, TDS and books before the audit.
- Ignoring related-party transactions and their disclosures.
- Not getting balance confirmations for large debtors, creditors and loans.
- Forgetting to file ADT-1 after appointing or reappointing the auditor.
Why PHMG
- Partner-led: a chartered accountant reviews your work, not only a junior team.
- Clear fee and scope in writing before we start.
- Deadlines tracked for you, with reminders well before the due date.
- Your documents and data are handled confidentially.
- Online service across India, with a single point of contact.
Fees depend on your case. Request a quote for a clear scope and fee.