Quick summary
A practical guide for Indian SME owners on statutory audit requirements under the Companies Act 2013, what auditors actually do, timelines, costs, and how to prepare for an audit.
Who is required to get a statutory audit in India?
Under Section 139 of the Companies Act, 2013, every company incorporated in India. Regardless of size, turnover, or whether it made a profit. Must appoint a Chartered Accountant as its statutory auditor and have its accounts audited every financial year. This applies to private limited companies, public limited companies, and one-person companies.
LLPs are required to have their accounts audited if their annual turnover exceeds ₹40 lakh or their capital contribution exceeds ₹25 lakh. Sole proprietorships and partnerships have no mandatory audit requirement under the Companies Act, but may require a tax audit under Section 44AB of the Income Tax Act.
- All companies under Companies Act 2013: Mandatory statutory audit
- LLPs with turnover >₹40 lakh or capital >₹25 lakh: Mandatory audit under LLP Act
- Tax audit (Section 44AB): Businesses with turnover >₹1 crore; professionals with receipts >₹50 lakh
- GST audit (GSTR-9C): Businesses with aggregate GST turnover >₹5 crore
- Cost audit: Specified industries as notified by MCA (pharmaceutical, cement, telecom, etc.)
What statutory auditors actually do
A statutory audit is an independent examination of a company's financial statements to provide reasonable assurance that the accounts are prepared in accordance with applicable accounting standards and give a true and fair view of the company's financial position.
In practice, the auditor reviews all major account balances, tests a sample of transactions, verifies physical existence of fixed assets and stock, confirms bank balances, reviews related-party transactions, assesses compliance with the Companies Act and relevant accounting standards, and issues an audit report that is filed with the ROC.
The audit report under Section 143 of the Companies Act must address specific matters including whether the accounts are prepared in accordance with applicable accounting standards, whether the company has maintained proper books of accounts, and whether any fraud on the company has been observed by the auditor.
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Get quotes from auditors near youThe audit process. What to expect
For a small private limited company, a statutory audit typically takes two to six weeks from the date of receiving all required records. Here is what the process looks like.
- Appointment: Auditor appointed at the first AGM (for a new company) or at each subsequent AGM for a maximum term of five years. Filed with ROC via Form ADT-1.
- Pre-audit: Auditor requests a list of documents. Trial balance, bank statements, all invoices above a threshold, board resolutions, contracts, and TDS certificates.
- Fieldwork: Auditor tests samples of transactions, verifies balances, reviews internal controls, and conducts physical verification (or oversight) of assets.
- Audit queries: Auditor raises queries on discrepancies, missing documentation, or accounting policy questions. Management responds in writing.
- Draft report: Auditor prepares draft financial statements and audit report for management review.
- Board approval: Board passes a resolution approving the financial statements.
- Filing: Audited financial statements filed with ROC (Form AOC-4) and annual return (MGT-7) within prescribed timelines.
What audits cost for SMEs in India
Audit fees for small private limited companies vary based on turnover, complexity, and the CA firm's scale. These are realistic market rates for FY 2025–26.
- Turnover below ₹1 crore (no transactions company or shell): ₹8,000–₹20,000
- Turnover ₹1–₹10 crore (active small company): ₹20,000–₹75,000
- Turnover ₹10–₹50 crore (mid-size company): ₹75,000–₹2,50,000
- Turnover ₹50–₹250 crore: ₹2,50,000–₹8,00,000
- Tax audit (Section 44AB, standalone): ₹10,000–₹50,000 in addition to statutory audit fee
- GST audit/GSTR-9C certification: ₹5,000–₹30,000 depending on complexity
How to prepare for your audit
Most audit delays and cost overruns are caused by inadequate preparation on the company's side. Missing records, unreconciled accounts, or last-minute document retrieval. Preparation takes 10–20 hours of internal effort but can cut audit time in half.
- Ensure books of accounts are fully up to date with all bank statements reconciled
- Prepare a fixed asset register with purchase invoices and depreciation schedule
- Reconcile all outstanding debtors and creditors; obtain balance confirmation letters from key counterparties
- Ensure all TDS certificates (Form 16A/16) have been received and matched against books
- Compile all board resolutions, shareholder agreements, loan agreements, and contracts from the year
- Reconcile GSTR-2B against purchase register and resolve any mismatches before the auditor arrives
- Prepare a list of all related-party transactions for the year
Frequently asked questions
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