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Audit of Company Accounts

Audit of Company Accounts

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

Convene AGM

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

CriteriaLast 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.

CS Deepa Sharma

Author is a associate member of the Institute of Company Secretaries of India (ICSI) and apart from that she holds LLB degree and Master in Commerce degree from Rajasthan University. She is having over 5 years of experience as a Practicing Company Secretary. She is well versed with all the matters related to Company Law and ROC matters, RERA , statutory reporting, Compliance Report and Corporate Governance. She is having good exposure in maintaining secretarial records as prescribed under Companies Act, 2013.

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