Audit & Assurance

Audit & Assurance: complete guide

Introduction

An audit is an independent examination of an entity's financial statements and records by a qualified professional, who then gives a formal opinion on whether those statements present a true and fair view. In India, audit is not optional for many businesses. Every company registered under the Companies Act, 2013 must have its accounts audited every year, whatever its size or turnover. Limited liability partnerships, trusts, societies, co-operative societies and businesses that cross the turnover limits under income tax law also have audit obligations under their own laws.

Assurance is a wider term. It covers any engagement where an independent professional checks information and reports on its reliability for someone who will rely on it. Alongside the statutory audit, businesses often need limited reviews of interim results, certificates for banks and regulators, stock and receivables audits for lenders, due diligence before an investment or acquisition, and agreed-upon procedures for a specific purpose. Each of these has its own scope, standard and form of report.

Audit work in India is regulated closely. Only a chartered accountant holding a certificate of practice, or a firm of such chartered accountants, can sign a statutory audit report or a tax audit report. The work must follow the Standards on Auditing issued by the Institute of Chartered Accountants of India, and for certain classes of companies the National Financial Reporting Authority has oversight of audit quality. An auditor must also be independent of the client, which limits the other services the same firm can provide. Our team coordinates audit and assurance engagements through practising chartered accountants who meet these requirements, so that the right professional signs the right report.

Professional help matters here because an audit is only as useful as the preparation behind it. Businesses that arrive at year end with unreconciled ledgers, missing invoices or unclear related-party transactions face long audits, qualified opinions and delayed filings. We help you get audit-ready, plan the engagement, respond to auditor queries and close the audit within the filing deadlines. This page explains who needs an audit, the legal framework, the process, the documents you will need, timelines, how pricing works and what happens once the report is signed.

Who Needs It

Audit and assurance services are needed by a wide range of entities, either because the law requires an audit or because a lender, investor or regulator asks for independent comfort.

• Every company. Private limited companies, one person companies, public companies and Section 8 companies must have a statutory audit under the Companies Act, 2013 each financial year, even if the company had no business or a loss.
• Limited liability partnerships above the limits. An LLP must have its accounts audited if its turnover exceeds 40 lakh rupees or its contribution exceeds 25 lakh rupees in a financial year, under the LLP rules. Smaller LLPs may still choose an audit voluntarily.
• Businesses and professionals liable to tax audit. Income tax law requires a tax audit where business turnover or professional receipts cross the prescribed limits, or where a taxpayer declares profit lower than the presumptive rate in certain cases. The limits are higher for businesses whose cash transactions are within a small share of the total.
• Charitable trusts and institutions. Trusts and institutions claiming exemption under income tax law must get their accounts audited when their income crosses the limit set in the law, and many state public trust laws also require an audit.
• Co-operative societies and societies. These are audited under the state co-operative or society registration laws, often by auditors from an approved panel.
• Borrowers with bank facilities. Lenders frequently ask for stock audits, receivables audits, end-use certificates and other assurance reports as a condition of the loan.
• Startups and growing businesses raising funds. Investors usually want audited financial statements and financial due diligence before they commit funds.
• Entities receiving foreign contributions or grants. Organisations registered for foreign contribution, and grant recipients, must submit audited statements or utilisation certificates to the authorities or donors.

Key Benefits

• Legal compliance. An audit on time allows you to file financial statements and returns within the deadlines, avoiding late fees, penalties and possible action against directors or partners.
• Credibility with stakeholders. Banks, investors, customers and government departments place far greater reliance on audited figures than on management accounts.
• Better access to finance. Most lenders require audited statements for loan sanction and renewal, and clean audit reports help in negotiating terms.
• Early detection of errors and irregularities. The audit process tests transactions and balances, which often brings out misstatements, weak controls and leakages before they become serious.
• Stronger internal controls. Auditors report on control weaknesses they find, and for many companies they are required to comment on internal financial controls over financial reporting.
• Smoother tax assessments. Well-documented audited accounts make it easier to respond to scrutiny or notices from the tax department.
• Support for valuation and transactions. Audited numbers are the starting point for valuations, mergers, share issues and due diligence.

Statutory audit, tax audit and assurance work compared. A statutory audit under the Companies Act, 2013 or the LLP law results in an opinion on whether the financial statements give a true and fair view. A tax audit is a separate exercise under income tax law, in which the auditor reports on specified particulars such as compliance with deduction rules, payments to related persons and tax deducted at source, in the prescribed form. Other assurance engagements, such as a limited review or a certificate, give a narrower conclusion on a defined subject. Many businesses need more than one of these in the same year, and planning them together saves time and repeated document requests.

How independence works in practice. The Companies Act, 2013 bars a company's statutory auditor from providing certain other services to that company, including accounting and bookkeeping, internal audit, design of financial information systems, actuarial services, investment advisory, investment banking, outsourced financial services and management services. This means that if one firm keeps your books, a different, independent firm must audit them. We plan engagements so that these rules are respected from the start.

Eligibility and Legal Requirements

The main legal provisions that govern audit and assurance in India are:

• Appointment of the first auditor. For a company, the board must appoint the first auditor within 30 days of incorporation. If the board fails to do so, the members must appoint the auditor at an extraordinary general meeting within 90 days.
• Appointment at the annual general meeting. At the first annual general meeting, the members appoint an auditor to hold office until the end of the sixth annual general meeting, that is, for a term of five years. The company files the prescribed intimation of appointment with the Registrar within the time allowed.
• Rotation of auditors. Listed companies and certain classes of unlisted public and private companies must rotate their auditors. An individual auditor can serve one term of five consecutive years, and an audit firm two terms of five consecutive years, followed by a cooling-off period.
• Eligibility of the auditor. Only a chartered accountant in practice, or a firm in which the majority of partners practising in India are chartered accountants, can be appointed. Persons with certain relationships, indebtedness, business interests or excess audit assignments are disqualified.
• Scope and reporting. The auditor reports under the Companies Act, 2013 and, where applicable, the Companies (Auditor's Report) Order, 2020, which requires comments on matters such as fixed assets, inventory, loans, statutory dues and fraud.
• Removal and resignation. An auditor can be removed before the end of the term only with a special resolution and prior approval of the Central Government. An auditor who resigns must file a statement giving reasons.
• LLP audit. LLPs above the prescribed turnover or contribution limits must have their accounts audited, and the audited statement of accounts and solvency is filed with the Registrar each year.
• Tax audit. Income tax law requires a tax audit report to be furnished by the specified due date in the prescribed form when the turnover, receipts or presumptive-tax conditions are met. The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026, with earlier years continuing under the old law, so the section and form references depend on the year being audited.
• Standards. All audits must follow the Standards on Auditing, and the accounts must be prepared under the applicable accounting standards or Indian Accounting Standards.

Audit rules, report formats and filing forms are revised from time to time. We check the current requirements at the time of each engagement.

Step-by-Step Guide

1. Initial assessment. We understand your entity type, turnover, borrowings, ownership and the reports you need, such as a statutory audit, tax audit, LLP audit or a lender certificate.
2. Independence and appointment. We confirm that the proposed auditor meets the eligibility and independence rules, obtain written consent and the eligibility certificate, and help you pass the board or members' resolution and file the intimation.
3. Engagement letter. The scope, reporting framework, responsibilities of management and auditor, timelines and deliverables are agreed in writing.
4. Audit readiness review. We review your trial balance, ledgers and reconciliations, and share a list of gaps to close before fieldwork, such as unreconciled bank accounts, unconfirmed party balances or missing fixed asset records.
5. Planning and risk assessment. The auditor studies the business, identifies areas with higher risk of misstatement, sets materiality and plans the tests to be carried out.
6. Fieldwork and testing. The audit team examines vouchers, contracts, bank statements, stock records and statutory filings, tests controls, and seeks external confirmations from banks, customers and suppliers where needed.
7. Queries and adjustments. Observations are shared with management. You provide explanations or documents, and any agreed adjustments are passed in the books.
8. Finalisation of financial statements. The balance sheet, statement of profit and loss, cash flow statement where required, and notes are finalised in the prescribed format, and the board approves them.
9. Signing the audit report. The auditor issues the audit report and, where applicable, the report under the Companies (Auditor's Report) Order and on internal financial controls. Management representation letters are signed at this stage.
10. Filing and closure. We help you file the financial statements and annual return with the Registrar, upload the tax audit report on the income tax portal for acceptance, and share a management letter with recommendations for the next year.

Documents Checklist

The exact list depends on the type of audit. Our team shares a tailored list at the start.

For a company:

• Certificate of incorporation, Memorandum and Articles of Association
• Trial balance, general ledger and previous year's audited financial statements
• Bank statements and bank reconciliation statements for all accounts
• Sales and purchase registers, invoices and credit or debit notes
• Fixed asset register with purchase invoices and depreciation workings
• Stock records and physical verification statements, if the company holds inventory
• Loan agreements, sanction letters and loan statements
• Minutes of board and general meetings and the statutory registers
• Details of related parties and related-party transactions
• GST returns, TDS returns and challans, and income tax workings

For an LLP or partnership firm:

• LLP agreement or partnership deed and any amendments
• Partners' capital and current account details
• Books of account, bank statements and reconciliations
• Details of remuneration and interest paid to partners
• GST and TDS records and previous year's financial statements

For a trust, society or not-for-profit:

• Trust deed or memorandum of association and registration certificates
• Receipts and payments records, donation registers and grant agreements
• Utilisation details for grants and any foreign contribution records
• Approval or registration orders under income tax law

For an assurance or certification engagement:

• The request letter or format from the bank, regulator or investor
• Underlying records relating to the subject matter, such as stock statements, debtor ageing or project expenditure

How Long It Takes

The time needed for an audit depends on the size of the business, the volume of transactions and how ready the books are. Typical timelines once complete records are available are:

• Small company or LLP audit: about one to three weeks.
• Mid-sized company audit: about three to six weeks, depending on the number of locations and the complexity of revenue and inventory.
• Tax audit: usually one to three weeks, often carried out alongside the statutory audit.
• Bank certificates and limited assurance work: a few working days to two weeks, depending on scope.
• Financial due diligence: two to six weeks, depending on the period covered and the number of issues found.

The biggest causes of delay are incomplete ledgers, pending reconciliations, slow responses to queries and missing third-party confirmations. Starting the audit soon after the financial year closes leaves enough time before the annual general meeting and the filing due dates.

Pricing

Audit and assurance fees are quoted after we understand your requirements, so please contact us for pricing. The quote depends on:

• The type of engagement, such as statutory audit, tax audit, LLP audit, stock audit, certification or due diligence
• Turnover, number of transactions and number of locations or branches
• The state of your books and how much preparation is needed before fieldwork
• Reporting requirements, such as the Companies (Auditor's Report) Order or internal financial controls reporting
• Deadlines and whether more than one report is needed in the same year

Our quote sets out the scope, the reports to be issued, the expected timeline and the information we need from you. Government filing fees for forms submitted to the Registrar or other authorities are payable at actual and are not part of the professional fee.

Common Mistakes to Avoid

• Not appointing the first auditor on time. Many new companies miss the 30-day window for appointing the first auditor, which leads to later compliance problems.
• Choosing a conflicted auditor. Asking the firm that keeps your books or runs your internal audit to also act as statutory auditor breaches the independence rules.
• Starting too late. Leaving the audit until a few weeks before the filing date leaves no room for queries and can force a rushed or qualified report.
• Unreconciled balances. Bank, GST, TDS and party balances that do not reconcile are a frequent source of audit observations.
• Ignoring related-party transactions. Transactions with directors, partners and their relatives need proper approvals and disclosure, and gaps here often lead to qualifications.
• Weak inventory records. Without physical verification and proper valuation, the auditor may be unable to rely on the stock figure.
• Treating the audit as a formality. Comments in the auditor's report are public for companies and are read by lenders and investors. Addressing issues early protects your reputation.

What Happens After

Once the audit report is signed, several follow-up steps remain:

• Adopt the accounts. For a company, the audited financial statements and the board's report are placed before the members at the annual general meeting for adoption.
• File with the Registrar. Companies file the financial statements and the annual return in the prescribed forms within the time allowed after the annual general meeting. LLPs file the statement of accounts and solvency and the annual return.
• File income tax returns. The tax audit report is uploaded before the due date, followed by the income tax return.
• Act on the management letter. Implement the auditor's recommendations on controls, documentation and processes before the next year.
• Plan for rotation and renewal. Track the auditor's term and, where rotation applies, plan the transition ahead of time.
• Keep records. Retain audit working papers provided to you, books of account and supporting documents for the period required by law.

Our team can also help with bookkeeping, internal audit by an independent team, annual compliance and tax filings, so the next audit cycle starts on a firm footing.

FAQs

Is an audit compulsory for a small private limited company?

Yes. Every company must have its accounts audited each year under the Companies Act, 2013, whatever its turnover, profit or level of activity. Small companies get some relaxations in reporting, but not an exemption from audit.

Does an LLP need an audit?

Only if its turnover exceeds 40 lakh rupees or its contribution exceeds 25 lakh rupees in the financial year. Below these limits, an audit is not mandatory, although the partners may still choose to get one.

What is the difference between a statutory audit and a tax audit?

A statutory audit gives an opinion on the financial statements as a whole under company or LLP law. A tax audit is required under income tax law when turnover or receipts cross the limits, and reports on specific tax-related particulars in a prescribed form. Many businesses need both.

Can the same accountant who keeps our books also audit them?

Not for a company's statutory audit. The law bars the statutory auditor from providing accounting and bookkeeping services to the same company. A separate, independent auditor is needed.

How long is a company auditor appointed for?

An auditor appointed at an annual general meeting holds office for five years, from the conclusion of that meeting until the conclusion of the sixth annual general meeting. Companies covered by rotation rules have limits on how many terms the same auditor can serve.

What if our company did no business during the year?

The audit is still required. The auditor will verify the balances, bank accounts, expenses and statutory compliance for the year, and the accounts must still be filed with the Registrar.

What is a qualified audit opinion?

A qualified opinion means the auditor found a material misstatement, or could not obtain enough evidence, in a specific area, but the rest of the statements are fairly presented. It can affect lending and investment decisions, so it is worth fixing the underlying issue.

Can we change our auditor in the middle of the term?

Yes, but removal before the end of the term needs a special resolution and prior approval of the Central Government. If the auditor resigns, the company must fill the casual vacancy as per the law. We guide you through the process.

What is a stock audit?

A stock audit is an assurance engagement, usually requested by a bank, in which an auditor verifies the inventory and sometimes receivables against the statements submitted to the lender. It is separate from the statutory audit.

Do trusts and NGOs need an audit?

Usually yes. Trusts and institutions claiming income tax exemption must get their accounts audited when income crosses the threshold, and state trust or society laws may require it regardless. Organisations receiving foreign contributions have their own audit and reporting requirements.

Do you sign audit reports yourselves?

Audit reports are signed by a practising chartered accountant or firm who is eligible and independent for your engagement, as the law requires. Our team coordinates the engagement, readiness and filings around that audit.

What happens if we miss the filing deadline because the audit is not finished?

Late filing of financial statements and returns attracts additional fees, and continued default can lead to penalties for the entity and its officers. Starting the audit early is the most reliable way to avoid this.

Are audit rules the same every year?

No. Reporting formats, standards and filing forms are updated from time to time, and the move to the Income-tax Act, 2025 has changed some references for tax audit. We check the current rules for each engagement.

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