Expert verified | TL;DR Summary: A statutory audit is legally mandatory for all companies under the Companies Act 2013 — regardless of turnover — and for LLPs exceeding ₹40 lakh in turnover or ₹25 lakh in partner contributions, with the audit report and AGM due by 30 September each year. Unlike a tax audit (which verifies tax compliance under the Income Tax Act), a statutory audit confirms that your financial statements present a true and fair picture — and some businesses need both. Beyond legal compliance, a statutory audit builds credibility with banks and investors, deters internal fraud, and strengthens your financial controls — making it a business tool, not just a regulatory checkbox. |
Every business owner in India has heard the term “statutory audit” at some point. But what does it actually mean? Who needs one? What documents do you need to keep ready? And how is it different from a tax audit?
If these questions have been on your mind, you have come to the right place. This guide covers everything you need to know about statutory audits in India, written in plain language without complicated jargon. You will also find practical next steps and actionable tips to help you prepare for an audit with confidence.
What is a Statutory Audit?
A statutory audit is a legally required check of a company’s financial records. The word “statutory” simply means “required by law.” An independent Chartered Accountant (CA) examines your books of accounts and confirms whether they show a true and accurate picture of your company’s finances.
Think of it like a health check-up for your business — except instead of a doctor checking your body, a qualified CA checks your finances.
This type of audit is primarily governed by the Companies Act, 2013, in India. It is separate from an income tax audit, though both are important.
Why Does a Statutory Audit Matter?
Here is the simple answer: it builds trust.
When banks, investors, government departments, or business partners want to understand your financial standing, audited financial statements are the gold standard. They show that an independent professional has reviewed your accounts and found them to be accurate.
Beyond trust, a statutory audit also helps you:
Identify errors or fraud in your accounts before they become bigger problems
Spot gaps in your internal financial controls
Stay compliant with the law and avoid penalties
Make better business decisions based on clean, verified data
For businesses looking to address both dimensions simultaneously, exploring PKC’s statutory and internal audit services gives you a clear picture of how the two work together to strengthen your financial governance.
Statutory Audit Applicability & Turnover Limits (FY 2026-27)
One of the most common questions business owners ask is: “Does my business need a statutory audit?” The answer depends on your business structure.
Companies (Private Limited, Public Limited, OPC, etc.)
If your business is incorporated as a company under the Companies Act, 2013, a statutory audit is mandatory regardless of your turnover or profit. Even if your company made no sales at all during the year, you are still required to have your accounts audited.
This applies to:
- Private Limited Companies
- Public Limited Companies
- One Person Companies (OPCs) — though with certain relaxations
- Section 8 (non-profit) Companies
There is no minimum turnover threshold for companies. The law applies from day one.
Limited Liability Partnerships (LLPs)
LLPs are governed by the LLP Act, 2008. A statutory audit is mandatory for an LLP if either of these conditions is met:
| Criterion | Threshold |
| Annual Turnover | Exceeds ₹40 lakhs |
| Partner Contribution | Exceeds ₹25 lakhs |
Important: Many LLP owners miss the second condition. Even if your turnover is below ₹40 lakhs, if your total partner contributions cross ₹25 lakhs, you are still required to get a statutory audit done.
Partnership Firms
Traditional partnership firms are not required to undergo a statutory audit under the Companies Act. However, they may be required to do so under the Income Tax Act (as a tax audit) if their turnover crosses the prescribed limit.
Sole Proprietors and Individuals
Statutory audits under the Companies Act do not apply to sole proprietors. However, income tax audits may be applicable based on turnover (explained further below).
Quick Reference Table — FY 2026-27
| Business Type | Statutory Audit Required? | Condition |
| Private Limited Company | Yes | Always — regardless of turnover |
| Public Limited Company | Yes | Always — regardless of turnover |
| One Person Company (OPC) | Yes | Always (with limited relaxations) |
| LLP | Yes (With Conditions) | Turnover > ₹40L or Contribution > ₹25L |
| Partnership Firm | No | May need a Tax Audit separately |
| Sole Proprietor | No | May need a Tax Audit separately |
Statutory Audit vs Tax Audit — Key Differences
Many business owners confuse statutory audits with tax audits. They are two completely different things. Here is a clear comparison:
| Feature | StatutoryAudit | Tax Audit |
| Governing Law | Companies Act, 2013 (or LLP Act) | Income Tax Act, 1961 — Section 44AB |
| Who It Applies To | All companies (regardless of turnover), LLPs above the threshold | Businesses with turnover above ₹1 crore; Professionals with receipts above ₹50 lakhs |
| Purpose | To confirm that financial statements are accurate and fair | To verify that income, expenses, and taxes are correctly reported |
| Conducted By | Chartered Accountant (appointed as Statutory Auditor) | Chartered Accountant (appointed as Tax Auditor) |
| Report Format | Audit Report as per the Companies Act | Form 3CA/3CB and Form 3CD |
| Deadline | Within 6 months of the financial year end (by 30 September for the March year-end) | 30 September of the Assessment Year (31 October for transfer pricing cases) |
| Mandatory For | Companies and qualifying LLPs | Businesses and professionals crossing turnover thresholds |
In simple terms, a statutory audit looks at whether your financial statements are accurate. A tax audit looks at whether you have paid your taxes correctly.
Some businesses need both. A private limited company with a turnover above ₹1 crore, for example, would need to undergo both a statutory audit and a tax audit.
Tax Audit Turnover Limits (FY 2026-27 / AY 2026-27)
For reference, the applicable thresholds for tax audit under Section 44AB are:
- Business: Turnover exceeds ₹1 crore. The threshold extends to ₹10 crore if 95% or more of your receipts and payments are done through digital modes (UPI, NEFT, RTGS, cards, etc.)
- Professionals (doctors, lawyers, CAs, architects, etc.): Gross receipts exceed ₹50 lakhs
Types of Statutory Audits in India
Depending on your business type, sector, or regulatory requirement, you may encounter these types of audits:
- Financial Audit (Statutory Audit under Companies Act) – The most common type — examines whether your financial statements are accurate and comply with accounting standards.
- Tax Audit (under Section 44AB of the Income Tax Act) – Examines your books from an income tax perspective. Required for businesses and professionals above the turnover thresholds mentioned above.
- Cost Audit – Applicable to specific industries such as pharmaceuticals, chemicals, and large manufacturing companies. It checks whether cost records are properly maintained and reported.
- Bank Audit – Conducted for scheduled commercial banks by empanelled Chartered Accountants. Ensures that the bank’s financial statements and risk management practices comply with RBI guidelines.
- Government Audit (CAG Audit) – Performed by the Comptroller and Auditor General of India for government departments and public sector undertakings. Focuses on whether public money has been spent correctly.
- GST Audit – Previously mandatory for businesses with a turnover above ₹2 crore, the external GST audit requirement has since been removed by the government. However, departmental audits by GST officers continue to apply.
Step-by-Step Audit Process & Timeline
Understanding the audit process helps you stay prepared and avoid last-minute stress. Here is how a typical statutory audit unfolds, step by step.
Step 1: Appointment of the Auditor
When: Before or at the first Annual General Meeting (AGM) after incorporation.
Under Section 139 of the Companies Act, 2013, every company must appoint a qualified CA or CA firm as its statutory auditor. The auditor is appointed for a period of five years (until the conclusion of the sixth AGM), subject to ratification. Importantly, the same CA firm cannot continue as your statutory auditor indefinitely — there are rotation rules for certain categories of companies.
Step 2: Planning and Understanding the Business
When: 1–2 weeks before fieldwork begins
Once appointed, the auditor will:
- Understand your business operations
- Review prior-year audit reports and financial statements
- Identify areas of risk (for example, if your company holds large amounts of stock or has many related-party transactions)
- Prepare an audit plan
Step 3: Pre-Audit Document Request
When: 2–4 weeks before fieldwork
The auditor will send you a list of documents and records they need. This is called a “PBC list” (Prepared By Client list). You will need to gather and organise these documents before the audit begins. (See the next section for a full list.)
Step 4: Fieldwork — Testing and Verification
When: Typically spans 1–3 weeks, depending on company size
This is the main audit phase. The auditor will:
- Examine your books of accounts, vouchers, invoices, and bank statements
- Verify physical stock and assets (if applicable)
- Test your internal controls to check if they are working properly
- Interview key team members
- Cross-check figures in your financial statements against source documents
Step 5: Draft Financial Statements Review
When: After fieldwork is complete
The auditor reviews the draft financial statements prepared by your accounts team. If there are errors, adjustments are proposed and discussed with management.
Step 6: Audit Report
When: After all issues are resolved
The auditor issues the final audit report. This report states whether the financial statements show a “true and fair view” of the company’s finances. The report is attached to the company’s annual financial statements and filed with the Registrar of Companies (ROC).
Step 7: Filing with ROC
When: Within the prescribed deadlines
The audited financial statements, along with the Annual Return, must be filed with the ROC. Key deadlines:
| Filing | Deadline |
| Holding AGM | Within 6 months of the financial year end |
| Filing AOC-4 (Financial Statements) | Within 30 days of AGM |
| Filing MGT-7 (Annual Return) | Within 60 days of AGMM |
Timeline Summary (For a March 31 Year-End Company)
| Milestone | Approximate Date |
| Financial year ends | 31 March |
| Audit fieldwork begins | April – June |
| AGM to be held | By 30 September |
| Audit report issued | By orbefore thee AGM date |
| AOC-4 filing deadline | 29–30 October (30 days after AGM) |
| MGT-7 filing deadline | 28–29 November (60 days after AGM) |
Documents Required for Audit Preparation
Being well-prepared with your documents can significantly reduce the time and cost of an audit. For a structured, step-by-step walkthrough of the full preparation process — beyond just the document list — see our dedicated guide on how to prepare for a statutory audit, which covers all 14 stages from engaging your auditor to coordinating on the day of fieldwork.
Financial Records
- Books of accounts (cash book, ledger, journal)
- Bank statements for all accounts (for the full financial year)
- Bank reconciliation statements
- Trial balance and general ledger
- Draft financial statements (Balance Sheet, Profit & Loss Account, Cash Flow Statement)
- The previous year’s audited financial statements
Revenue and Sales Documents
- Sales invoices and sales register
- Purchase invoices and purchase register
- GST returns (GSTR-1, GSTR-3B, GSTR-9)
- Debtors’ list with ageing analysis (how old each outstanding payment is)
Expense and Payment Documents
- Expense vouchers and bills
- TDS (Tax Deducted at Source) returns and challans
- Salary registers and payroll records
- Proof of major capital expenditures
Asset and Liability Records
- Fixed asset register (list of all machinery, equipment, furniture, etc.)
- Loan agreements and repayment schedules
- Creditors list with ageing analysis
- Statutory dues payment records (PF, ESI, GST, TDS, advance tax)
Corporate Documents
- Certificate of Incorporation
- Memorandum and Articles of Association
- Board meeting minutes for the financial year
- Shareholder register and share certificates
- Related-party transaction details
Compliance Documents
- ROC filings from the previous year
- Any notices or orders received from the income tax, GST, or other departments
- Insurance policies for assets
Pro tip: Maintaining a well-organised document folder throughout the year — rather than scrambling to collect everything at audit time — saves significant time and reduces the chance of errors.
Consequences of Not Conducting a Statutory Audit
Ignoring your statutory audit requirement can be costly. Under Section 147 of the Companies Act, 2013:
- The company can be fined between ₹25,000 and ₹5 lakhs
- The officers of the company (including directors) who are in default can face fines between ₹10,000 and ₹1 lakh
- In serious cases, imprisonment for officers is also possible
Beyond direct penalties, non-compliance can also hurt your business in practical ways:
- Banks may decline loan applications if audited accounts are unavailable
- Investors and venture capitalists will be reluctant to fund a company with unaudited books. The good news: engaging a trusted firm early removes all of this risk. Explore PKC’s statutory audit services to understand how we help companies stay fully compliant, penalty-free, and audit-ready throughout the year.
- It becomes harder to file accurate income tax returns, leading to further compliance issues
Top Benefits of Statutory Audits for Your Business
1. Builds Confidence with Banks and Investors
Lenders and investors want assurance that your numbers are accurate before committing funds. Audited financial statements serve as credible proof.
2. Helps You Find and Fix Errors Early
An auditor often catches accounting mistakes, unrecorded transactions, or misclassified expenses that your internal team may have missed. Fixing these early prevents bigger problems later.
3. Protects Against Fraud
An annual audit acts as a deterrent against internal fraud. When employees know that an independent professional will examine the books, they are less likely to attempt financial misconduct.
4. Improves Your Internal Processes
Auditors do not just check numbers — they also review your internal financial controls. Their recommendations can help you build stronger systems and processes inside your organisation.
5. Helps With Tax Planning
A statutory audit often surfaces deductions, exemptions, or tax credits that your business may have overlooked, helping you reduce your overall tax liability.
6. Ensures Legal Compliance
Staying compliant with the Companies Act keeps your company in good standing with the Registrar of Companies and other authorities, avoiding penalties and legal complications.
Why Choose PKC Management Consulting for Your Statutory Audit?
PKC Management Consulting (also known as Prakash Kochar & Co.) has been one of South India’s most trusted names in audit, taxation, and business advisory since 1988. Founded by Mr Prakash Kochar, an All India Rank 12 Chartered Accountant with over 35 years of experience, PKC has grown into a firm with 200+ professionals across offices in Chennai, Bengaluru, Coimbatore, Mumbai, and Pune.
Here is What Makes Working with PKC Different
Deep Experience Across Industries
PKC’s audit team has served over 1,500 clients across manufacturing, retail, IT, healthcare, education, construction, FMCG, logistics, and more. Our auditors do not just understand accounting — they understand businesses.
Audit That Goes Beyond Compliance
For PKC, an audit is not just a post-mortem of your books. Our team identifies weaknesses in financial controls, highlights operational inefficiencies, and provides practical recommendations you can actually implement.
Technology-Driven Approach
We use the latest audit tools and automated procedures to deliver accurate, faster results. Our dedicated in-house Knowledge & Research team ensures our professionals stay updated with every regulatory change.
Experienced and Qualified Team
Our team includes CAs with All India Ranks, former Big 4 professionals, and industry specialists who bring a combination of technical depth and practical business sense to every engagement.
Offices Across India
With locations in Chennai, Bengaluru, Coimbatore, Mumbai, and Pune, PKC serves businesses across the country while maintaining the personalized, partner-led approach of a mid-tier firm.
Timely Execution
We understand that audit deadlines have real consequences. Our project management approach ensures that your audit is planned, executed, and completed on time — every time.
FAQ: Common Questions About Statutory Audits in India
Q1. Is a statutory audit mandatory for a private limited company with zero turnover?
Yes. Under the Companies Act, 2013, all private limited companies must undergo a statutory audit, even if they have no sales or revenue during the year. There is no turnover-based exemption for companies.
Q2. Can the same CA who handles our day-to-day accounts be our statutory auditor?
No. The statutory auditor must be independent of the company. A CA who is an employee, officer, or partner of the company, or who has a significant financial interest in it, is not eligible to be the statutory auditor. This independence rule is fundamental to the purpose of an audit.
Q3. How long does a statutory audit typically take?
It depends on the size and complexity of your business. For a small to medium-sized company, the audit process typically takes 4 to 8 weeks from the time documents are submitted. Larger organizations with multiple locations may take longer.
Q4. What happens if the auditor finds a problem in the accounts?
If the auditor finds a material error or issue, they will first discuss it with your management team. In most cases, corrections can be made before the audit report is finalized. If the issue cannot be resolved, the auditor will flag it in their report — this is called a “qualified audit opinion.” Investors, banks, and regulators take such qualifications seriously.
Q5. Do LLPs need a statutory audit if they have not yet started operations?
It depends on the partner contributions made to the LLP. If total contributions exceed ₹25 lakhs, a statutory audit is required regardless of whether business operations have started or what the turnover is.
Q6. Can we change our statutory auditor before the five-year term ends?
Yes, but only in specific circumstances — for example, if the auditor resigns, becomes ineligible, or if the shareholders pass a resolution removing the auditor for specific reasons. This process must follow the procedures outlined in the Companies Act.
Q7. Is a statutory audit the same as an internal audit?
No. A statutory audit is an external, legally required examination conducted by an independent CA. An internal audit is conducted by an in-house team or an external firm appointed by the management to review operations and controls. Internal audits are not a legal replacement for statutory audits.
Q8. What is the difference between a clean audit opinion and a qualified one?
A “clean” or “unqualified” opinion means the auditor is satisfied that the financial statements are accurate and fair. A “qualified” opinion means the auditor has identified an issue that affects part of the financial statements. An “adverse” opinion means the auditor believes the financial statements are materially misleading. Most companies aim for a clean opinion.
Q9. What is the deadline for completing a statutory audit for FY 2026-27?
For companies with a financial year ending on 31 March 2027, the statutory audit must be completed, and the AGM must be held by 30 September 2027. Filing of financial statements with the ROC follows within 30 days of the AGM.
Q10. Does a startup or newly incorporated company also need a statutory audit?
Yes. From the very first financial year of incorporation, a company must appoint a statutory auditor and have its accounts audited. There is no grace period for startups or newly registered companies.
