Statutory audit - mandatory compliance for companies and LLPs

Statutory audit is a legally required examination of a company's financial statements by a qualified auditor to ensure they give a true and fair view of the company's financial position and comply with applicable laws.

Only a Chartered Accountant (CA) or a firm of Chartered Accountants can conduct a statutory audit. A CA must hold a Certificate of Practice from the ICAI.

Section 139 mandates that every company shall have its accounts audited by a statutory auditor within the prescribed time limits. The first auditor is appointed by the Board, subsequent auditors by shareholders in the AGM.

An auditor can hold office for 5 consecutive years in the case of a private company and 5 consecutive years in the case of a public company. After this, they must cool off for 5 years before reappointment.

Form 3CB is the form in which the report of an audit of accounts of a person is to be filed with the Income Tax Department, where audit under any other law is not required.

CARO (Companies Auditor's Report Order) is a comprehensive report that the statutory auditor must prepare as per MCA guidelines, covering various aspects of the company's operations and financial reporting.

XBRL (eXtensible Business Reporting Language) is a format for filing financial statements with the MCA. All companies above certain thresholds must file their financial statements in XBRL format.

Statutory audit is mandatory for all companies/LLPs under Companies Act. Tax audit is mandatory under Income Tax Act for businesses exceeding turnover thresholds. Statutory audit focuses on financial statements; tax audit focuses on income tax compliance.

Non-compliance with statutory audit requirements can result in penalties under Section 147 of the Companies Act, including fines for the company and officers in default, and potential invalidation of financial statements.

Yes, the same CA can perform both statutory and tax audits. However, some companies prefer different auditors for different purposes to ensure independent oversight.

The auditor's report is the formal opinion of the statutory auditor on whether the financial statements present a true and fair view. It includes the balance sheet, profit and loss account, cash flow statement, and notes to accounts.

An unqualified (clean) opinion means the auditor found the financial statements to be free from material misstatements and compliant with applicable accounting standards. It is the most favorable opinion.

A qualified opinion means the auditor found that the financial statements are fairly presented except for a specific issue. This is less favorable than an unqualified opinion but not as serious as an adverse opinion.

The audit committee oversees the statutory audit process, reviews audit findings, approves auditor appointment and remuneration, and monitors the company's financial reporting process and internal controls.

Yes, if a startup is incorporated as a private limited company. All private limited companies, including startups, must have their accounts audited annually by a statutory auditor, regardless of turnover.