Audit of Financial Statement

The audit is a process wherein a thorough checking is done on sample data to ascertain whether the books of account reflect the correct and proper view of the affairs of the business or not. In India many statutes prescribe audit to be done by a qualified chartered accountant in full-time practice


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Audit of Financial Statement

The Statutory Audit of the financial statement is an independent examination of the books of account of a company or eligible LLP by an independent chartered accountant in full-time practice. The audit is a very serious business, and the auditor is under obligation to conduct it in a free and fair manner. As per the companies act the audit of a company can be done by an independent auditor who must not be providing any other service to the company like GST filing or maintenance of books of account or any advisory what so ever. In other words, the auditor must be impartial and not advisors of the business which he is auditing. There is very stringent penalty including imprisonment to the CA as well as company and its directors including key managerial personnel in case there is any violation on this.

A company is required to prepare financial statement for period ending 31st March every year. Such financial statement must give a true and fair view of the state of affairs of the company and comply with the accounting standards notified by the central government under Section 133 of the Companies Act. The expression financial statement includes a balance sheet as at the end of the financial year; a profit and loss account or in the case of a company carrying on any activity not for profit, an income & expenditure account for the financial year; cash flow statement for the financial year; a statement for changes in equity if applicable; and any explanatory note annexed to, or forming part of, any document referred above.

Key Points on Audit of Annual Accounts of Company

Appointment of First Auditor
The board of directors of a newly incorporated company under The Companies Act, 2013 is required to appoint a statutory auditor within 30 days of incorporation of the company. In case the directors fail in appointing the auditor the shareholders must do it within 90 days thereof.
Appointment of Subsequent Auditor
The first auditor can hold office only until the conclusion of the first annual general meeting (AGM). The members must appoint the subsequent auditors in the AGM of the company for a period not exceeding five years. The report of such appointment needs to be filed with the ROC.
Audit and Auditors Report
The auditor is required to audit the books of account at the end of FY by verifying financial data and information received from the management so that he can ascertain whether the financial statement gives true and fair view of the State of Affairs of the company under audit.
Audit of LLP
The statutory audit of LLP is required to be conducted by a practising CA in cases the capital employed is more than 20 lacs, or the turnover of the LLP exceeds 40 Lacs. However, where the agreement of the LLP prescribe for audit even on lesser turnover then that provision shall prevail
Income Tax Audit
Tax Audit is conducted as per the provisions of Section 44AB of the Income Tax Act, which gets applicable on a class of taxpayers. At present every business with a turnover of 2 crores and professionals with 50 Lac turnover is subjected to Tax Audit. The tax audit needs to be done in compliance with the tax provisions.
GST Audit
Under the GST law, every taxpayer has a turnover exceeding Rs. 1 Crore during a particular financial year is required to get its books audited under GST law by a practising chartered accountant or a practising cost accountant. The auditor is to prepare and annexe a reconciliation statement with his report.
Penal Consequences on Non-Compliance concerning audit.

Non Appointment of the first or subsequent auditor within stipulated time is punishable with Rs. 5 Lac on company and 1 Lac by every director and officer of the company

The company is required to file the financial statement to the ROC along with audit report within 30 Days of AGM; the non-filing is punishable with a penalty of Rs. 1000 per day until date of filing

Every LLP is required to file the audit report along with its financial statement in Form-8 before 30th October, failure in filing results in a penalty of Rs. 100 for each day of delay.

Tax Audit report must be filed with income tax department on or before 30th September following the previous year, on failure the penalty prescribed is Rs.1,50,000/- or 0.5% of total turnover whichever is lower