What does a statutory audit checklist cover?
A statutory audit checklist is the list of matters in the audit the Companies Act requires of every company, every year. There is no turnover below which the audit is skipped. The auditor reports whether the financial statements give a true and fair view. Which other audits can sit beside this one is on the audits page.
Which companies are audited?
Every company, including a small company, a one person company, and a company with no sales. The books are kept on the accrual basis and in double entry, at the registered office, or at another place in India if the board decides and files that notice within seven days. They are preserved for eight years. That duty is set out on the company audit page.
What is checked about the auditor?
The first auditor is appointed by the board within 30 days of incorporation. If the board does not appoint one, the members do so within 90 days. That auditor holds office until the first annual general meeting. The members then appoint the auditor until the conclusion of the sixth annual general meeting, and the company files ADT-1 within 15 days of that appointment. ADT-1 is not the filing for the board’s first appointment. The appointment rules are on the auditor page.
Which records are examined?
- The balance sheet and the statement of profit and loss. A small company, a one person company, and a dormant company do not prepare a cash-flow statement.
- The statutory registers, including members, directors, charges, and contracts in which directors are interested.
- Board meetings and, where the company holds one, the annual general meeting. The meeting rules are on the board meetings page.
- Share capital, a buy-back if there was one, and loans and investments where sections 185 and 186 apply. A buy-back is on the buy-back page.
- Accounting standards notified under section 133, and the audit trail in the accounting software, on the audit trail page.
What does the report add?
The auditor’s report under section 143 states whether the financial statements give a true and fair view, and it includes the matters the Act and the rules require. Where CARO 2020 applies, the report also answers that order. A company outside CARO is still audited. A written representation from the directors records what they have told the auditor. The report is not the income-tax return. A company’s return is due on 31 October, or on 30 November where a transfer-pricing report applies.
Frequently asked questions
Four questions cover a small company, ADT-1, the cash-flow statement, and the tax audit.
Does a small company skip the statutory audit?
No. Every company is audited, including a small company and a one person company. There is no turnover threshold for this audit.
Is ADT-1 filed for the board’s first auditor?
No. The board appoints the first auditor within 30 days of incorporation, and that auditor holds office until the first annual general meeting. ADT-1 is filed within 15 days of the appointment the members make.
Does every company prepare a cash-flow statement?
No. A small company, a one person company, and a dormant company do not. The audit still covers the balance sheet and the statement of profit and loss.
Is the tax audit part of this checklist?
No. A tax audit under section 44AB is a separate report. The company’s statutory audit happens whether or not that section applies.
Sources
The audit is sections 139 and 143. The books are section 128. CARO is a separate order.