Statutory Audit Under the Companies Act, 2013 in India
Independent statutory audit support for private limited companies, public companies, subsidiaries and growing businesses. Understand auditor appointment, audit planning, financial statement review, CARO 2020, Schedule III disclosures and statutory reporting requirements.
N C Agrawal & Associates assists businesses with statutory audit and related corporate compliance, with a focus on clear communication, appropriate audit documentation and reporting in accordance with applicable law and professional standards.
Serving companies in Delhi NCR, Noida and Bengaluru, and considering suitable audit engagements in other Indian business centres subject to scope, eligibility and audit logistics. Our listed offices are in Delhi, Noida/Greater Noida and Bengaluru.
A statutory audit is an independent examination of a company’s financial statements conducted under the Companies Act, 2013. It is intended to provide shareholders with an auditor’s opinion on whether the financial statements give a true and fair view in accordance with the applicable financial reporting framework. It is not merely a year-end formality or a check of whether tax returns have been filed.
Companies operating in major commercial and financial centres such as Delhi NCR, Mumbai, Bengaluru, Hyderabad, Chennai, Pune, Ahmedabad, Kolkata, Gurugram and Noida may have different business models, financing structures and reporting risks. The audit approach must be tailored to the company’s activities, size, accounting framework, internal controls and statutory obligations.
What Is Statutory Audit Under the Companies Act, 2013?
Section 139 of the Companies Act, 2013 deals with appointment of auditors. Section 143 sets out the powers and duties of auditors and the contents of the auditor’s report. The Companies (Audit and Auditors) Rules, 2014, the applicable Accounting Standards or Indian Accounting Standards (Ind AS), the relevant provisions of Schedule III and other applicable legal requirements form part of the statutory framework.
The statutory auditor is required to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an audit report based on the audit evidence obtained. An audit provides reasonable, not absolute, assurance.
Appointment of Auditor
Appointment, reappointment, first auditor, casual vacancy and rotation requirements, as applicable to the company.
Duties & Reporting
Access to books and information, audit procedures, reporting responsibilities and statutory auditor’s opinion.
Consequences of Default
Penalty provisions for contraventions relating to auditor appointment, duties and reporting obligations.
Which Entities Require a Statutory Audit?
Under the Companies Act, every company registered under the Act is generally required to have its financial statements audited annually. The obligation is not removed merely because the company has low turnover, has not commenced business, has incurred a loss or has had no significant transactions during the year.
- Private Limited Companies
- Public Limited Companies, whether listed or unlisted
- One Person Companies (OPCs)
- Section 8 companies
- Holding companies, subsidiary companies and associate companies, as applicable
- Eligible foreign companies in respect of their Indian operations and financial reporting obligations, as applicable
For businesses choosing an entity structure, read our company registration and incorporation guide and LLP registration services.
Appointment of Statutory Auditor: Section 139
The auditor’s appointment procedure depends on whether the company is newly incorporated, an existing company appointing an auditor at its AGM, a government company or a company in which a casual vacancy has arisen. The company should also verify the auditor’s eligibility, independence, consent and certificate before appointment.
| Situation | Broad statutory requirement |
|---|---|
| First auditor of a non-government company | Board to appoint within 30 days of registration. If the Board fails, it must inform members, who appoint the auditor within the statutory period at an EGM. |
| First auditor of a government company | Appointment is made by the Comptroller and Auditor General of India (C&AG) within the period prescribed under Section 139. |
| Subsequent auditor | Members appoint the auditor at the first AGM. The auditor generally holds office from the conclusion of that AGM until the conclusion of the sixth AGM, subject to the Act and applicable provisions. |
| Notice to ROC | The company is required to file notice of appointment with the Registrar within 15 days of the meeting in which the auditor is appointed, through the applicable prescribed form. |
| Casual vacancy | Filling of a casual vacancy is governed by Section 139(8), with different requirements depending on the reason for vacancy and whether the company is government-owned or controlled. |
Auditor appointment should not be treated as a routine upload. The company should check the auditor’s written consent, eligibility certificate, independence, disqualifications under Section 141 and applicable rotation restrictions. The auditor should also evaluate whether the appointment is within the limits prescribed by law.
Auditor Eligibility, Independence & Disqualification: Section 141
Only a Chartered Accountant in practice, or an eligible firm of Chartered Accountants, can be appointed as statutory auditor of a company. Where an audit firm is appointed, only partners who are Chartered Accountants are authorised to act and sign on behalf of the firm.
Section 141 and the applicable rules prescribe circumstances in which a person or firm is not eligible for appointment. These include specified employment or business relationships, prohibited financial interests, indebtedness or guarantees beyond prescribed limits, certain relationships with directors or key managerial personnel, excessive audit appointments and other disqualifications.
- Check the auditor’s professional qualification and valid practice status.
- Obtain written consent and the prescribed eligibility certificate.
- Evaluate independence and prohibited relationships with the company and related entities.
- Check the ceiling on number of audit appointments and the applicable exclusions.
- Review rotation and cooling-off restrictions wherever applicable.
Rotation of Auditors: Section 139(2)
Mandatory rotation applies to listed companies and prescribed classes of companies. Broadly, an individual auditor may hold office for one term of five consecutive years, while an audit firm may hold office for two terms of five consecutive years, subject to the detailed provisions, exclusions and cooling-off requirements.
The rotation provisions do not apply indiscriminately to every company. The company must first determine whether it falls within the classes prescribed under the Companies (Audit and Auditors) Rules, 2014. The audit firm’s common partners, network and prior tenure should also be examined as required by the rules.
Before reappointing an auditor, verify:
- Whether the company is covered by mandatory rotation provisions.
- Previous tenure of the individual auditor and/or audit firm.
- Whether the proposed appointment breaches the cooling-off period.
- Whether common-partner restrictions or other disqualifications apply.
- Whether the required shareholder resolution and ROC filing are completed.
Scope of Statutory Audit: What Does the Auditor Examine?
The audit programme is designed after understanding the company, its industry, accounting systems, internal controls and risk areas. Procedures vary with the nature and scale of operations. Typical areas include:
Books & Accounting Records
General ledger, journal entries, trial balance, supporting vouchers, accounting policies and closing adjustments.
Revenue & Receivables
Sales recognition, contracts, cut-off, credit notes, customer balances, ageing and recoverability.
Expenses & Payables
Expense recognition, provisions, vendor balances, statutory dues, accruals and year-end cut-off.
Assets & Inventory
Property, plant and equipment, depreciation, impairment, physical verification, inventory and valuation.
Borrowings & Finance
Loan agreements, interest, security, repayment terms, covenant compliance and end-use where relevant.
Related Parties & Disclosures
Related-party transactions, director interests, contingent liabilities, commitments and financial statement disclosures.
Financial Statements & Schedule III Compliance
Section 129 requires financial statements to give a true and fair view, comply with the applicable accounting standards and be presented in the form prescribed under Schedule III, subject to the applicable framework. Schedule III has different divisions for companies following Accounting Standards, Ind AS and the relevant framework for specified NBFCs.
Financial statements generally include the Balance Sheet, Statement of Profit and Loss, Cash Flow Statement where applicable, Statement of Changes in Equity where applicable, and Notes to Accounts. Disclosures may cover ageing schedules, related-party transactions, ratios, title deeds, borrowings, leases, contingent liabilities, commitments, corporate social responsibility and other matters depending on the applicable division and facts.
CARO 2020: Applicability & Reporting
The Companies (Auditor’s Report) Order, 2020 (CARO 2020) is issued under Section 143(11). Where applicable, it requires the statutory auditor to report on additional specified matters in the auditor’s report. CARO 2020 has applied to financial years commencing on or after 1 April 2021.
CARO 2020 covers matters such as property, plant and equipment, inventory, working capital limits, loans and advances, statutory dues, wilful defaulter status, related-party transactions, internal audit, cash losses, auditor resignation, ability to meet liabilities and other specified matters.
Companies generally excluded from CARO 2020
- Banking companies.
- Insurance companies.
- Companies licensed under Section 8.
- One Person Companies.
- Small companies within the meaning of Section 2(85), subject to the definition applicable for the relevant date.
- Certain private limited companies that satisfy all the specific conditions in CARO 2020, including the prescribed paid-up capital and reserves, borrowing and revenue tests, and are not holding or subsidiary companies of a public company.
CARO applicability is not determined by turnover alone. The company’s legal status, relationship with public companies, capital, reserves, borrowings and revenue must be evaluated. For consolidated financial statements, CARO has a separate limited reporting rule. A clause-wise applicability review should be documented.
Internal Financial Controls (IFC): Section 143(3)(i)
Where applicable, the auditor reports on the adequacy and operating effectiveness of the company’s internal financial controls with reference to financial statements. The applicability of this reporting requirement depends on the company category and the exemptions provided under the applicable rules and notifications.
Internal financial controls are not limited to whether accounting software is in place. They include policies and procedures that provide reasonable assurance over orderly conduct of business, safeguarding of assets, prevention and detection of fraud and errors, accuracy of accounting records and timely preparation of reliable financial information.
Statutory Audit Report: Main Reporting Components
The auditor’s report is prepared in accordance with the Companies Act and applicable Standards on Auditing issued by ICAI, as applicable. Depending on the company and audit findings, it may include:
- Opinion on the financial statements and the basis for opinion.
- Key audit matters, where applicable.
- Emphasis of matter or other matter paragraphs, where required.
- Reporting under Section 143(3) of the Companies Act.
- CARO 2020 annexure, where applicable.
- Internal financial controls reporting, where applicable.
- Reporting on qualifications, reservations, adverse remarks or disclaimers, with reasons.
Statutory audit report is different from tax audit report. Form 3CA/3CB and Form 3CD relate to tax audit under Section 44AB of the Income-tax Act. They are not the statutory audit report formats under the Companies Act. A company may be subject to both statutory audit and tax audit, depending on the facts and applicable law.
Read our separate tax audit under the Income-tax Act page for the distinction and tax audit requirements.
2025 Amendment to Companies (Audit and Auditors) Rules
The Ministry of Corporate Affairs notified the Companies (Audit and Auditors) Amendment Rules, 2025 through G.S.R. 359(E) dated 30 May 2025, effective from 14 July 2025. The amendment substituted the prescribed Forms ADT-1, ADT-2, ADT-3 and ADT-4 and amended Rule 13 relating to reporting of fraud by the auditor to the Central Government. Under the amended provision, the report is to be filed electronically in Form ADT-4.
Companies and auditors should use the applicable revised e-forms and instruction kits on the MCA portal, and should not rely on old downloaded templates. The amendment is a forms and reporting-process update; it does not remove the need to comply with the substantive requirements of Sections 139, 140, 141 and 143.
Important Forms & ROC Filings Connected With Statutory Audit
| Form / Filing | Purpose | General point to check |
|---|---|---|
| ADT-1 | Notice of appointment of auditor | Filing requirement and due date following the appointment meeting. |
| ADT-2 | Application for removal of auditor | Prior Central Government approval and statutory procedure, where applicable. |
| ADT-3 | Notice of resignation by auditor | Auditor’s filing and statement of reasons within the prescribed period. |
| ADT-4 | Auditor’s report to Central Government on suspected fraud | Follow Section 143(12), Rule 13 and the revised electronic form procedure. |
| AOC-4 / applicable variant | Filing of financial statements with ROC | File within the prescribed period after the AGM, subject to applicable rules. |
| MGT-7 / MGT-7A | Annual return | Form depends on company category and applicable requirements. |
For connected annual compliance work, visit our ROC compliance services and company annual filing page.
Statutory Audit Timeline: What Companies Should Plan For
The statutory audit should be planned well before the AGM and ROC filing deadlines. The Companies Act does not prescribe a universal date of 30 September as the statutory audit completion date for every company. The AGM timeline, financial statement approval process and filing deadlines must be read together with the company’s financial year, any permitted extension and applicable rules.
Prepare Records
Close books, reconcile ledgers, review fixed assets, inventory, loans, statutory dues and related-party balances.
Share Information
Provide trial balance, ledgers, bank statements, agreements, confirmations and supporting schedules.
Resolve Queries
Complete audit procedures, discuss proposed adjustments and finalise financial statement disclosures.
Complete Filings
Lay statements before members at the AGM and complete applicable ROC filings within prescribed timelines.
For most companies, the AGM is required to be held within six months from the close of the financial year, subject to statutory provisions and exceptions. Financial statements are generally filed with the Registrar within 30 days of the AGM under Section 137, subject to the applicable rules. The annual return is generally filed within 60 days of the AGM under Section 92. Verify the applicable due dates and extensions for the relevant year.
Documents Generally Required for a Statutory Audit
Corporate & Statutory Records
- Certificate of Incorporation, MOA and AOA.
- Previous year audited financial statements and audit report.
- Board and shareholder minutes and resolutions.
- Register of members, directors and charges, as relevant.
- Previous auditor appointment details and ROC filings.
Financial & Accounting Records
- Trial balance, general ledger and cash/bank books.
- Bank statements and bank reconciliations.
- Sales, purchase, expense and journal voucher details.
- Fixed asset register and depreciation workings.
- Inventory records and physical verification details.
Tax & Regulatory Information
- GST returns and reconciliations.
- TDS returns, challans and reconciliations.
- Income tax returns, assessments and tax demands.
- PF, ESI and other statutory payment records.
- Licences, registrations and regulatory correspondence.
Specific Audit Evidence
- Loan agreements, sanction letters and confirmations.
- Debtor and creditor confirmations and ageing.
- Related-party transaction details.
- Legal cases, claims, guarantees and commitments.
- Management representations and explanations.
Statutory Audit Services for Major Business & Financial Centres in India
Our statutory audit service page is intended for companies seeking professional audit support across India. Businesses may contact us from the following commercial centres. Engagement acceptance, audit team deployment, physical verification and on-site procedures will depend on the company’s location, records, nature of operations, professional eligibility and agreed engagement terms.
We also welcome enquiries from Mumbai, Pune, Chennai, Ahmedabad, Kolkata, Gurugram, Jaipur, Kochi, Indore, Chandigarh and other Indian commercial centres. These references indicate areas from which enquiries may be accepted; they are not a representation that N C Agrawal & Associates maintains a physical branch in each city.
Related Corporate, Tax & Compliance Services
Statutory audit is often connected with other annual and event-based compliance requirements. You may find these related service pages useful:
Why Choose N C Agrawal & Associates for Statutory Audit?
Experienced CA-Led Practice
Professional leadership by CA Neeraj Bansal (FCA, B.Com), with experience in audit, taxation and corporate compliance.
Compliance-Focused Approach
Attention to the Companies Act, applicable accounting framework, audit documentation and connected ROC requirements.
Practical Communication
Clear discussion of information requirements, audit queries, reporting observations and agreed deliverables.
Audit engagements are accepted subject to independence, professional eligibility, capacity, conflict checks and applicable ICAI requirements. The auditor’s opinion is based on audit evidence and cannot be predetermined or guaranteed.
Frequently Asked Questions on Statutory Audit
1. Is statutory audit compulsory for every private limited company?
Generally, yes. A company registered under the Companies Act is required to have its financial statements audited annually, irrespective of turnover, profit or business activity. The audit obligation is distinct from tax audit applicability.
2. Is statutory audit applicable to an LLP?
LLPs are governed by the LLP Act, 2008, not the Companies Act, 2013. Their audit applicability is determined separately under the LLP Act and LLP Rules. CARO 2020 does not apply to an LLP merely because it is a body corporate.
3. Which section of the Companies Act deals with statutory audit?
Section 139 deals with appointment of auditors, Section 141 with eligibility and disqualifications, Section 143 with powers and duties, and Section 147 with penalties for contraventions. Other provisions and rules also apply.
4. When should the first auditor be appointed?
For a non-government company, the Board is required to appoint the first auditor within 30 days of registration. If it fails, the members are required to appoint the auditor within the statutory period at an extraordinary general meeting.
5. Is Form ADT-1 required after auditor appointment?
The company is required to give notice of appointment to the Registrar within 15 days of the meeting in which the auditor is appointed, using the applicable prescribed form and MCA filing process.
6. What is the difference between statutory audit and tax audit?
Statutory audit is conducted under the Companies Act, 2013. Tax audit is conducted under Section 44AB of the Income-tax Act, where applicable. Tax audit reports use Forms 3CA/3CB and Form 3CD; these are not Companies Act statutory audit report forms.
7. Does CARO 2020 apply to all companies?
No. CARO 2020 contains specified exclusions, including banking and insurance companies, Section 8 companies, OPCs, small companies and certain qualifying private companies. Applicability must be checked against the current definition and all relevant conditions.
8. What changed in the 2025 Audit and Auditors Amendment Rules?
The 2025 amendment, effective 14 July 2025, substituted Forms ADT-1, ADT-2, ADT-3 and ADT-4 and amended the procedure for electronic filing of the auditor’s fraud report in Form ADT-4.
9. What are the revised small company limits?
With effect from 1 December 2025, the prescribed paid-up capital and turnover limits for a small company were enhanced to ₹10 crore and ₹100 crore respectively, subject to the other exclusions and conditions in Section 2(85). The relevant reporting-period position should be checked before applying the CARO exclusion.
10. Is CARO 2020 applicable to consolidated financial statements?
CARO 2020 generally does not apply to the auditor’s report on consolidated financial statements, except for the specified reporting requirement under paragraph 3(xxi). The detailed facts and applicable version of the Order should be checked.
11. What is the due date for completing statutory audit?
There is no universal statutory audit completion date of 30 September for every company. The audit must be completed in time for the financial statements to be approved and placed before the AGM, while complying with AGM and ROC filing timelines applicable to the company.
12. Can a company appoint the same auditor for every year?
Reappointment is possible subject to the Companies Act, auditor eligibility and independence, prescribed rotation provisions and any applicable tenure or cooling-off restrictions.
13. What documents are needed for a statutory audit?
Typical documents include the trial balance, ledgers, bank statements, invoices, fixed asset and inventory records, loan documents, statutory returns, previous financial statements, minutes, agreements and supporting schedules. The exact list depends on the company’s activities and audit risks.
14. Do you provide statutory audit services outside Delhi NCR?
We consider suitable engagements from Bengaluru and other Indian business centres, subject to professional eligibility, independence, scope, location, on-site requirements and team availability. Please share your company details and location for an initial discussion.
15. How can we obtain a fee quote for statutory audit?
Professional fees depend on the company’s size, turnover, business activity, number of locations, accounting records, group structure, CARO and IFC applicability, audit complexity and expected timelines. A quote can be shared after understanding the scope.
Looking for a Statutory Auditor for Your Company?
Share your company name, CIN, registered office location, nature of business, latest financial statements and the financial year for which audit assistance is required. Our team can review the requirement and discuss the next steps, scope and professional fees.
Email: info@caindelhincr.in
Legal and professional note: This page is for general information and service enquiries, not a substitute for examining the Companies Act, rules, notifications, accounting standards and facts applicable to a particular company and financial year. Statutory requirements may change. The engagement scope and audit opinion are subject to applicable law, ICAI standards and professional independence requirements.