Statutory Audit – Complete Guide for Businesses in India
Every business, whether small or large, must ensure that its financial statements reflect a true and fair view of its financial health. This is where a Statutory Audit plays a vital role. Conducted by a qualified Chartered Accountant, it provides authenticity, transparency, and credibility to your accounts.
If you’re a business owner or company director, understanding what statutory audit means, who needs it, and how it works can help you stay compliant with Indian laws and avoid future complications. Let’s explore everything you need to know about Statutory Audit in India.
🧾 What is a Statutory Audit?
A Statutory Audit is a legally mandated review of a company’s financial statements to ensure they present a true and fair view of its financial performance and position.
It is carried out by an independent Chartered Accountant (CA) appointed by the company in accordance with the provisions of the Companies Act, 2013 or other applicable laws.
The auditor examines the books of accounts, vouchers, and supporting documents to verify that financial statements such as the Balance Sheet, Profit & Loss Account, and Cash Flow Statement are accurate and comply with accounting standards and legal requirements.
⚖️ Objective of a Statutory Audit
The primary goal of a statutory audit is to ensure accuracy and transparency in financial reporting. But it serves many other important purposes too:
- ✅ To verify that the financial statements are free from material misstatements.
- ✅ To ensure compliance with applicable accounting and legal standards.
- ✅ To detect and prevent frauds or irregularities.
- ✅ To build trust among shareholders, investors, banks, and regulatory authorities.
- ✅ To provide an unbiased opinion on the company’s financial position.
🏢 Applicability of Statutory Audit in India
Statutory audits are mandatory under various laws, depending on the type of organization.
1. For Companies (under the Companies Act, 2013)
Every company registered under the Companies Act — whether private limited, public limited, or one-person company (OPC) — must get its accounts audited every year.
- This includes both small and large companies.
- The auditor is appointed at the company’s first Annual General Meeting (AGM).
- The report must be filed with the Registrar of Companies (ROC) along with the annual return.
2. For Limited Liability Partnerships (LLPs)
Under the LLP Act, 2008:
- Statutory audit is mandatory if the LLP’s turnover exceeds ₹40 lakh or its capital contribution exceeds ₹25 lakh in a financial year.
3. For Societies and Trusts
If registered under the Societies Registration Act or Indian Trusts Act, they must also conduct audits annually as per their governing rules or donor requirements.
4. For Other Entities
Certain entities such as banks, insurance companies, and co-operative societies are governed by their respective laws and are required to undergo statutory audits regularly.
📚 Key Areas Covered in Statutory Audit
A statutory auditor examines all major aspects of financial reporting. The audit usually covers:
- Verification of books of accounts and vouchers
- Examination of income and expenses to confirm their authenticity
- Verification of fixed assets and depreciation
- Checking of loans, advances, and investments
- Verification of statutory dues like GST, TDS, PF, and ESI
- Review of related party transactions
- Verification of compliance with company law and accounting standards
- Evaluation of internal control systems
📑 Documents Required for Statutory Audit
Before beginning the audit, companies must provide the following documents to the auditor:
- Incorporation certificate and PAN
- Memorandum and Articles of Association (MOA & AOA)
- Financial statements (Balance Sheet, P&L, Cash Flow)
- Books of accounts and ledgers
- Bank statements and reconciliation
- Purchase and sales invoices
- Fixed asset register
- Details of loans, advances, and investments
- TDS and GST filings
- Previous year’s audit report (if any)
- Minutes of board meetings and AGMs
Proper documentation helps auditors conduct the audit efficiently and ensures no discrepancies are left unnoticed.
🧠 Process of Statutory Audit
Let’s understand how the statutory audit process typically works step-by-step:
Step 1: Appointment of Auditor
The first statutory auditor is appointed within 30 days of incorporation by the Board of Directors. Subsequent auditors are appointed in the Annual General Meeting (AGM).
Step 2: Planning and Understanding Business
The auditor gains an understanding of the company’s business operations, internal control system, and accounting framework.
Step 3: Examination of Records
The auditor verifies the books of accounts, vouchers, and other supporting records to ensure that all transactions are genuine and properly recorded.
Step 4: Checking Compliance
The auditor checks compliance with:
- The Companies Act, 2013
- Accounting Standards (Ind AS/AS)
- Income Tax Act, GST laws, and other applicable regulations
Step 5: Preparation of Audit Report
After thorough examination, the auditor prepares a Statutory Audit Report providing an opinion — whether the financial statements present a true and fair view of the company’s financial position.
Step 6: Submission to ROC
The final audited financials, along with the auditor’s report, are submitted to the Registrar of Companies (ROC) as part of annual filing (Form AOC-4 and MGT-7).
📋 Contents of a Statutory Audit Report
The statutory audit report usually contains:
- Auditor’s opinion (qualified, unqualified, adverse, or disclaimer)
- Details of scope and methodology
- Observations and findings
- Comments on internal control system
- Compliance remarks
- Financial ratio analysis (in some cases)
An unqualified opinion indicates that the auditor found the financial statements fair and free from material misstatements — which enhances the company’s credibility.
💡 Types of Auditor’s Opinion
| Type of Opinion | Meaning |
|---|---|
| Unqualified Opinion | Clean report – everything is true and fair |
| Qualified Opinion | Minor issues or deviations found |
| Adverse Opinion | Major misstatements found; financials not reliable |
| Disclaimer of Opinion | Auditor unable to form an opinion due to lack of information |
💰 Penalties for Non-Compliance
If a company fails to conduct a statutory audit or file its audit report within the prescribed time, penalties can apply to both the company and its officers.
| Nature of Default | Penalty |
|---|---|
| Failure to appoint auditor | ₹25,000 to ₹5,00,000 |
| Failure to file audit report | ₹100 per day (under ROC filing rules) |
| Misreporting by auditor | Severe penalties or imprisonment under Section 147 of the Companies Act |
📊 Example – How Statutory Audit Works
Let’s understand with a simple example:
A Private Limited Company in Patna records ₹3 crore turnover in FY 2024–25. It has more than 20 employees and multiple clients. By law, it must:
- Maintain proper books of accounts
- Get its financials audited by a Chartered Accountant
- File the Statutory Audit Report with ROC before 30th September 2025
This ensures that the company’s reported profits, liabilities, and assets are genuine and compliant with Indian accounting laws.
🧾 Difference Between Statutory Audit and Internal Audit
| Basis | Statutory Audit | Internal Audit |
|---|---|---|
| Meaning | Legally mandated audit of financial statements | Voluntary or internal check of processes |
| Conducted By | Independent Chartered Accountant | Internal auditor or employee |
| Purpose | Ensure legal compliance | Improve internal control and efficiency |
| Frequency | Annually | Periodically (quarterly or monthly) |
| Governing Law | Companies Act, 2013 | Company’s internal policies |
Both are important, but statutory audit is mandatory for companies, while internal audit is a management tool for continuous monitoring.
⚙️ Benefits of Statutory Audit
A statutory audit isn’t just a legal formality — it adds real value to your business:
- Improves transparency: Boosts confidence among shareholders and investors.
- Prevents fraud: Helps detect and stop financial irregularities.
- Ensures compliance: Keeps you safe from legal penalties.
- Increases credibility: Essential for obtaining loans, tenders, or funding.
- Financial accuracy: Confirms that your books truly reflect business performance.
- Better decision-making: Provides management with reliable financial data.
🧩 Statutory Audit for Different Entities
1. Private Limited Company
Mandatory for all companies irrespective of turnover.
2. LLPs
Required if turnover exceeds ₹40 lakh or capital exceeds ₹25 lakh.
3. NGOs and Trusts
Required under Income Tax Act and governing trust laws if income exceeds the exemption limit.
4. Co-operative Societies
Statutory audits conducted under state co-operative laws annually.
🧮 Role of Chartered Accountant in Statutory Audit
A Chartered Accountant is authorized under the Chartered Accountants Act, 1949 to conduct statutory audits.
Their responsibilities include:
- Verifying accuracy of books and vouchers.
- Ensuring compliance with legal and accounting standards.
- Reporting material misstatements.
- Giving independent and unbiased audit opinions.
The CA’s report holds high value for regulators, financial institutions, and investors.
📅 Due Dates for Statutory Audit Filing
- Companies: Audit report to be submitted before 30th September following the financial year.
- LLPs: Financial statements and audit report to be filed before 30th October.
Timely filing ensures smooth ROC compliance and prevents late fees or penalties.
💼 Our Statutory Audit Services
At Meerad, we provide professional and reliable Statutory Audit Services for companies, LLPs, and organizations across India. Our expert Chartered Accountants ensure full compliance with the Companies Act, 2013, Accounting Standards, and other relevant laws.
Our Services Include:
- Statutory audit under Companies Act, 2013
- Audit of LLPs, NGOs, and co-operative societies
- Preparation of audit report and financial statements
- ROC and Income Tax filing assistance
- Compliance review and advisory
- Representation before government authorities if required
✅ Why Choose Us?
- Experienced Chartered Accountants: Qualified professionals with years of audit experience.
- Comprehensive Audit Approach: We focus on compliance, accuracy, and risk detection.
- PAN-India Availability: Services available online across India including Patna, Delhi, and other major cities.
- Affordable Fees: Transparent pricing with no hidden charges.
- End-to-End Compliance Support: From audit report to ROC filing — we handle it all.
📞 Get Your Statutory Audit Done Today
Statutory audit is not just a compliance requirement — it’s an opportunity to enhance your business credibility and financial discipline. Let our experienced Chartered Accountants handle your audit efficiently while you focus on growing your business.
📱 Contact No: +91-85400-99000
📧 Email: info@meerad.in
🏢 Address: A98, Bindapur Matiala Road, Uttam Nagar, New Delhi, India-110059