What is a statutory audit?
Reviewed by Ranga & Company
Statutory audit: A statutory audit is an audit required by law, in which an independent chartered accountant examines an entity's financial statements and reports whether they give a true and fair view.
At a glance
- Companies
- Every company under the Companies Act, 2013, whatever its size
- LLPs
- Turnover above ₹40 lakh or contribution above ₹25 lakh
- Auditor
- Practising CA or CA firm, appointed for 5 years at the AGM
- Output
- Audit report on the financial statements, with CARO where applicable
Statutory audit vs tax audit
| Statutory audit | Tax audit | |
|---|---|---|
| Required by | Companies Act / LLP Act / other laws | Income-tax Act (section 44AB) |
| Covers | The whole financial statements | Tax-related particulars in Form 3CD |
| Triggered by | Being a company (always) or LLP above limits | Turnover or receipts above limits |
| Signed by | Practising CA | Practising CA |
How an audit runs
- Planning and risk assessment
- Testing ledgers, bank reconciliations and stock
- Reviewing compliance with accounting standards
- Reporting, including the CARO checklist and a management letter
Common mistakes
- Small private companies assuming they don't need an audit
- Leaving books incomplete until the auditor arrives, which delays the ROC filing
Frequently asked questions
Does a small private limited company need a statutory audit?
Yes. Every company must have its accounts audited each year under the Companies Act, 2013, regardless of turnover or profit.
Who can do a statutory audit?
Only a chartered accountant or a CA firm holding a certificate of practice, appointed as the auditor of the company or LLP.
When does an LLP need an audit?
When turnover exceeds ₹40 lakh or partners' contribution exceeds ₹25 lakh in a financial year.
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