What is Audit?
“Audit” means to examine something thoroughly. Auditing is an independent inspection of the financial information of any organization; whether profit-oriented or not profit-oriented, irrespective of its legal form, status or size when such examination is conducted with a view to express an opinion thereof”.
Need For Company Audit
Auditing of book of accounts means verification of accounts by an independent professional to ensure that the accounting has been carried as per the relevant regulatory requirements and to check the veracity of transactions and make an opinion whether the books of Accounts shows a true and fair view of financial transactions by the business.
Every company has to get its accounts audited by its Statutory Auditor irrespective of size and turnover and file the same with the Registrar of Company.
The Companies Act 2013 mandates every company to keep its books of accounts and other relevant books and papers and financial statement giving a true and fair view on accrual basis and as per double entry system which shall be maintained at the registered office of the company for every financial year. However, the board of directors may keep the books of accounts at any other place in India after filing a notice with the Registrar of Companies.
Who can become Auditor of a Company ?
A Chartered Accountant who holds a valid certificate of practice under Chartered Accountants Act, 1949 can only become an auditor of the company. Also, the company can appoint a firm as its auditor if majority of partners are practising in India and are eligible for appointment. Further, only those partners who are chartered accountant shall be allowed to sign on behalf of such a firm.
Appointment of First Auditor by a Company
The first Auditor of a company shall be appointed within 30 days from the date of incorporation of the company by the board of directors. If the Board fails to appoint one, the members of the company have to appoint the first auditor at an Extraordinary General Meeting 120 days from the date of incorporation.
Auditor to Sign Audit Reports
The statutory auditor shall sign the auditor’s report or certify financial statements and other document of as required in accordance with the provisions of the Act.
Company Annual Filing
Company annual filing refers to the filing of audited financial accounts of the Company along with Directors Report and Annual Return of Company with Registrar of Companies. These yearly filings are mandatory for every registered Company whether the Company carries on business or not.
Company Annual Filing
Preparation of Annual Financial Accounts
Audit by Chartered Accountant
Preparation of Directors Report
Filing of AOC-4
Filing of MGT-7
Income Tax (IT) Return
Income Tax Return
As per the Income Tax Act, every company is required to close its financial year on 31st March every year and file returns with the Income Tax Department.
Every Company is required to file Income Tax Returns every year mandatorily whether they do business or not. If the annual turnover of a business is more than Rs.100 lakhs, the accounts have to be audited by a qualified Chartered Accountant as required under the Income Tax Act as well.
Income Tax Return
|Criteria||Last date for filing|
|If Company Accounts is NOT required to be audited||31 August|
|If Company Accounts is required to be audited||30 September|
Penalty for Contravention
- The company shall be punishable with fine not be less than Rs.25,000.00 which may extend to Rs.5,00,000
- Every officer of the company shall be punishable with imprisonment for a term 1 year or with fine not less than Rs10,000.00 which may extend to Rs.1,00,000.00, or with both.
- The auditor shall be punishable with fine not less than Rs.25,000. but which may extend to Rs.5,00,000.00 or 4 times the remuneration of the auditor, whichever is less.