A Statutory Audit is a legally mandated audit of a company’s financial statements to ensure accuracy, transparency, and compliance with the applicable laws and accounting standards. In India, statutory audits are governed primarily by the Companies Act, 2013, Income Tax Act, 1961, and other sector-specific regulations. Every company-irrespective of its size, structure, or nature of business-is required to undergo statutory audit annually.
What is a Statutory Audit?
A Statutory Audit is a compulsory audit of an organization’s financial statements carried out by an independent Chartered Accountant (CA) or audit firm. It ensures that:-
- The financial statements reflect a true and fair view
- The company complies with Indian Accounting Standards (IND-AS)
- All financial transactions are recorded as per law
- There is no misstatement, fraud, or manipulation
Who Needs a Statutory Audit in India?
Under the Companies Act, 2013, every company incorporated in India must undergo statutory audit, including:
- Private Limited Companies
- Public Limited Companies
- One Person Companies (OPCs)
- Section 8 Companies
- Foreign companies operating in India
- LLPs (If turnover exceeds limits)
Objectives of Statutory Audit
The key objectives are:
- To ensure financial statements are accurate, complete & reliable
- To detect fraud, misstatements, and irregularities
- To verify compliance with accounting standards
- To improve corporate governance
- To enhance transparency for shareholders & regulators
- To review internal control systems
Eligibility of Statutory Auditor
Only a practicing Chartered Accountant or a CA firm registered with ICAI can be appointed as a statutory auditor.
Disqualifications
An auditor cannot be appointed if he/she:
- Is a related party of directors
- Has financial interest in the company
- Is indebted to the company
- Is convicted of fraud (last 10 years)
- Has business relationship with the company
Scope of Statutory Audit
A statutory audit covers:
- Review of financial statements
- Verification of accounting policies
- Checking compliance with Companies Act
- Evaluation of internal controls
- Examination of books of accounts
- Detection of fraud & misstatements
- Review of director & related-party transactions
- Verification of loans, advances, & investments
- Checking provisions, liabilities, contingent liabilities
Responsibilities of a Statutory Auditor
The auditor must:
- Maintain independence
- Verify compliance with law
- Report fraud or suspected fraud
- Provide true & fair opinion
- Conduct audit as per ICAI standards
- Keep working papers as evidence
Statutory Audit Report - Key Contents
A standard audit report includes:
- Auditor’s opinion
- Basis for opinion
- Key audit matters
- Responsibilities of management
- Auditor’s responsibilities
- CARO Report (where applicable)
- Annexures & financial schedules
Penalties for Non-Compliance
Failure to complete statutory audit can result in:
- Heavy penalties on company
- Penalties on directors
- Disqualification of directors
- MCA scrutiny, notices & legal action
- Additional fees for delayed filings
Benefits of Statutory Audit
A statutory audit provides numerous advantages:
- Ensures accuracy of financial statements
- Strengthens internal controls
- Prevents fraud & financial irregularities
- Boosts investor & shareholder confidence
- Enhances creditworthiness
- Ensures legal compliance
- Helps in tax planning & assessments
- Improves operational efficiency
Common Mistakes Found During Statutory Audit
Many companies unknowingly make errors that lead to audit qualifications or penalties.
Most common mistakes include:
- Incorrect classification of expenses
- Mismatch between GST returns & books
- Unaccounted cash transactions
- Missing invoices or vouchers
- Incorrect depreciation calculation
- Non-disclosure of related party transactions
- Errors in TDS deductions or payments
- Mismatch between physical stock & books
- Poor documentation of loans & advances
Avoiding these mistakes ensures smooth and clean audit reporting.
Common Qualifications in Statutory Audit Report
A “qualification” means the auditor has found irregularities or issues.
Typical qualifications include:
- Improper valuation of inventory
- Lack of supporting documents
- Non-compliance with IND-AS
- Delayed GST/TDS filings
- Improper revenue recognition
- Incorrect loan disclosure
- Failure to maintain statutory registers
Companies should address these issues before next audit cycle.
Why Choose Us for Statutory Audit?
We offer:
- Experienced Chartered Accountants
- 100% compliance-focused approach
- Detailed risk assessment
- Transparent reporting
- Support for filings & MCA submissions
- Affordable pricing packages
- End-to-end audit assistance
- Industry-specific audit expertise
Whether you are a startup, small business, Section 8 company, or large enterprise-we ensure accurate, timely, and efficient statutory audit services.
Frequently Asked Questions (FAQs)
Is statutory audit mandatory for all companies?
Yes, every registered company must undergo annual statutory audit.
Who can sign a statutory audit report?
Only a practicing Chartered Accountant or CA firm.
What is the timeline for statutory audit?
Audit is done after preparation of financial statements and before filing AOC-4.
What is the difference between statutory audit and tax audit?
Statutory audit ensures compliance with Companies Act, while tax audit ensures compliance with Income Tax Act.
What is CARO in statutory audit?
CARO is an additional reporting requirement applicable to specific companies.