Statutory audits are conducted in order to report the state of a company’s finances and accounts to the Indian government. Such audits are performed by qualified auditors who are working as external and independent parties. The audit report of a statutory audit is made in the form prescribed by the government agency.

Statutory Audits in India

In India, statutory audits are conducted for each fiscal year (April 1 to March 31) and not the calendar year. The two most common types of statutory audits in India are:

• Tax Audits
• Company Audits

Tax Audits
Tax audits are required under Section 44AB of India’s Income Tax Act 1961. This section mandates that every person whose business turnover exceeds INR1 crore and every person working in a profession with gross receipts exceeding INR25 lakh must have their accounts audited by an independent chartered accountant.

It should be noted that the provision of tax audits are applicable to everyone, be it an individual, a partnership firm, a company or any other entity. The tax audit report is to be obtained by September 30 after the end of the previous fiscal year. Non-compliance with the tax audit provisions may attract a penalty of 0.5 percent of turnover or INR1 lakh, whichever is lower.

There are no specific rules regarding the appointment or removal of a tax auditor.

Company Audits
The provisions for a company audit are contained in the Companies Act 1956. Every company, irrespective of its nature of business or turnover, must have its annual accounts audited each financial year. For this purpose, the company and its directors have to first appoint an auditor at the outset. Thereafter, at each annual general meeting (AGM), an auditor is appointed by the shareholders of the company who will hold the position from one AGM to the conclusion of the next AGM.