In today's dynamic business landscape, transparency and compliance are paramount. For companies in India, a Statutory Audit is not just a legal requirement; it is a critical tool for building trust, ensuring financial health and fostering sustainable growth. At Praman Advisors Private Limited, we specialize in providing intelligent compliance solutions including expert guidance through the intricacies of Statutory Audit. This will demystify the process and highlight how our tailored approach can benefit your business.
1. Overview of Statutory Audit:
A Statutory Audit is a legally mandated examination of a company's financial statements and records to ensure they present a true and fair view of its financial position. It is carried out by independent chartered accountants and is crucial for verifying that the company adheres to applicable laws, regulations and accounting standards. In India, the Companies Act 2013 makes statutory audits mandatory for most registered companies, regardless of their turnover or profit.
The primary objective is to provide stakeholders (investors, creditors, government and the public) with assurance about the reliability and accuracy of the financial information reported by the company. It goes beyond just numbers; it also assesses the effectiveness of internal financial controls.
A statutory audit offers a multitude of benefits that extend far beyond mere compliance:-
- Enhanced Credibility and Trust: An audited financial statement acts as a seal of approval, instilling confidence in stakeholders regarding your company's financial integrity. This is vital for attracting investors, securing loans and building strong business relationships.
- Fraud Detection and Prevention: Auditors meticulously scrutinize financial records, identifying discrepancies, errors and potential fraudulent activities. This proactive approach helps safeguard your assets and strengthens internal controls.
- Ensuring Regulatory Compliance: The audit ensures your company adheres to the Companies Act 2013 accounting standards (like Ind AS/AS), tax laws and other relevant regulations, thereby avoiding hefty penalties and legal repercussions.
- Improved Financial Discipline: The audit process encourages better record-keeping and financial management practices within your organization, leading to streamlined operations and increased efficiency.
- Informed Decision-Making: Accurate and reliable financial data provided by the audit empowers management to make well-informed strategic decisions regarding expansion, investments and resource allocation.
- Operational Efficiency: Auditors often identify weaknesses or inefficiencies in financial processes, providing recommendations for improvement that can lead to cost savings and enhanced operational performance.
To ensure a smooth and efficient statutory audit process, you will need to gather a comprehensive set of documents. While the exact requirements may vary based on the company's size and complexity, here is a general checklist:-
- Financial Records:
- Trial Balance.
- General Ledger and Subsidiary Ledgers (Debtors, Creditors, Inventory).
- Cash Book and Bank Book.
- Sales Register and Purchase Register.
- Journal Entries with supporting vouchers.
- Credit Notes and Debit Notes.
- Expense Ledgers.
- Loan and Interest Register.
- Bank Statements and Bank Reconciliation Statements (BRS).
- Inventory Valuation Reports.
- Legal and Statutory Registers (under Companies Act, 2013):
- Minutes Book (Board, AGM, EGM).
- Share Register / Member Register.
- Register of Directors & KMP (Key Managerial Personnel).
- Register of Charges.
- Register of Contracts.
- Memorandum of Association (MOA) & Articles of Association (AOA).
- Certificate of Incorporation.
- Taxation Records:
- PAN and TAN details.
- Computation of taxable income.
- Income Tax Returns (ITR-6 or applicable).
- Tax Audit Report (Form 3CD, if applicable).
- Tax payment challans and refund orders.
- TDS Returns (Form 24Q/26Q/27Q) and Form 16/16A.
- GST registration certificate.
- GSTR-1, GSTR-3B, and GSTR-9 filings.
- GST reconciliation with books and GSTR-2B.
- PF & ESI challans and returns.
- Payroll and HR Documentation:
- Employee Master List.
- Attendance and Leave Records.
- Salary Structure & Payslips.
- TDS Deducted on Salaries (Form 16).
- Bonus, Gratuity, Incentive Records.
- Fixed Assets and Depreciation:
- Fixed Asset Register.
- Depreciation Schedule.
- Invoice copies of major asset purchases.
- Capitalization records.
- Disposal/Impairment records.
- Bank and Loan Documentation:
- Loan Agreements.
- Interest Certificates from Banks.
- Internal Control & Audit Trail Records
- Miscellaneous Documents:
- Details of contingent liabilities.
- Confirmation of accounts with sister concerns.
- Any other industry-specific documentation.
Engaging Praman Advisors Private Limited for your statutory audit is a straightforward process designed for efficiency:-
- Initial Consultation: Reach out to us via phone or email to schedule an initial consultation. During this meeting, we will understand your business, its specific needs and discuss the scope of the audit.
- Engagement Letter: Based on the consultation, we will provide a detailed engagement letter outlining the scope of work, timelines and fees. Once reviewed and accepted, this formalizes our engagement.
- Document Submission: We will provide you with a comprehensive checklist of documents required for the audit. Our team will assist you in organizing and submitting these documents.
- Audit Planning: Our experienced auditors will develop a tailored audit plan including risk assessment and identification of key areas of focus.
- Fieldwork and Verification: Our team will conduct the audit at your premises (or remotely, as agreed), meticulously examining financial records, verifying transactions and assessing internal controls. This may involve inquiries with your staff, analytical procedures and substantive testing.
- Reporting and Recommendations: Upon completion of the audit, we will provide a comprehensive audit report. This report includes our opinion on your financial statements along with any observations, suggestions for improvement and a management letter highlighting control deficiencies or areas of concern.
- Filing with ROC: We will guide you through the process of filing the audited financial statements and audit report with the Registrar of Companies (ROC) within the stipulated deadlines.
The fees for a statutory audit may vary based on various factors including:-
- Size and Complexity of the Company: Larger companies with more transactions and complex structures typically incur higher audit fees.
- Industry Type: Certain industries may have specific regulations or complexities that impact audit time and cost.
- Volume of Transactions: A higher volume of financial transactions generally requires more extensive audit procedures.
- Condition of Books of Accounts: Well-maintained and organized books can streamline the audit process, potentially reducing costs.
Praman Advisors Private Limited provides transparent fee structures and will offer a personalized quote after assessing your specific company details.
Manju Laur: 📞 +97119 94042
Timelines:
The statutory audit process generally aligns with the financial year. Key timelines include:-
- Appointment of Auditor: The appointment of initial auditor of a company must be done within 30 days of its incorporation. Subsequent auditors are appointed/reappointed at the Annual General Meeting (AGM) for a term of five years.
- Completion of Audit: The audit should ideally be completed well before the Annual General Meeting (AGM) of the company.
- Annual General Meeting (AGM): The AGM must be held within six months of the end of the financial year (i.e. by September 30th). The audited financial statements are presented and adopted at the AGM.
- Filing with ROC: The audited financial statements (Form AOC-4) and annual return (Form MGT-7) must be filed with the ROC within 30 days and 60 days of the AGM respectively.
Our team at Praman Advisors works diligently to ensure your audit is completed efficiently and all statutory deadlines are met, helping you avoid penalties for non-compliance.
Frequently Asked Questions
Yes, almost all registered companies in India including Private Limited Companies, Public Limited Companies, One Person Companies (OPCs) and Section 8 Companies are required to undergo a statutory audit under the Companies Act 2013 regardless of their turnover or profit. Limited Liability Partnerships (LLPs) also require an audit, if their turnover exceeds ₹40 lakhs or capital exceeds ₹25 lakhs.
A statutory audit in India can only be conducted by a Chartered Accountant (CA) holding a Certificate of Practice (CoP) and who is independent of the company being audited.
An internal audit is conducted by an internal team or an appointed firm to review operational efficiency and internal controls, primarily for management's benefit. A statutory audit, on the other hand, is a legally mandated external audit performed by an independent CA to ensure financial statements present a true and fair view for external stakeholders and regulatory compliance.
Non-compliance with statutory audit requirements can lead to heavy penalties for the company and its officers including fines and potential disqualification of directors. It can also damage the company's reputation and credibility.
Praman Advisors provides comprehensive statutory audit services, leveraging a team of experienced professionals and a client-centric approach. We ensure accurate and compliant financial reporting, provide valuable insights, help identify and mitigate risks and assist in meeting all regulatory deadlines, allowing you to focus on your core business.
