Running a private limited company in India comes with more than just business responsibilities- it also involves adhering to legal and financial regulations, one of the most important being annual audits.
Audit requirements are not optional for private limited companies in India - they are mandated under the Companies Act, 2013, irrespective of the company's size or turnover.
An audit examines a company’s books of accounts, financial statements, and internal controls to determine whether they present an accurate and fair view of its financial position. In this blog, we’ll break down the auditing requirements for private limited companies in India- what an audit really means, who can conduct it, key deadlines, necessary ROC forms, required documentation, and the entire audit process.
Table of Contents
Private Limited Audit
A private limited audit refers to the mandatory examination of a private limited company’s financial records, statements, and internal controls. As per Section 139 of the Companies Act, 2013, every private limited company, irrespective of its turnover, must appoint a Statutory Auditor to audit its books of accounts annually.
The purpose of this audit is:
- To ensure the accuracy of financial reporting.
- To verify compliance with accounting and statutory requirements.
- To safeguard stakeholders' interests, including shareholders and regulators.
Related Read: Appointment of Auditor: A Complete Guide
Types of Audit of a Private Limited Company
Private limited companies in India are subject to various types of audits, each serving a distinct purpose and governed by specific laws.
1. Statutory Audit
Under the Companies Act, 2013, it is mandatory for all private limited companies, regardless of their size or turnover. It is conducted by an independent Chartered Accountant who verifies whether the company’s financial statements are free from material misstatements and presents a true and fair view of its financial position.
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2. Internal Audit
It is required for companies that meet certain financial thresholds related to turnover, outstanding loans, or paid-up capital, as defined under Section 138 of the Companies Act. This audit is not focused on external compliance but on assessing the efficiency of internal controls, identifying risks, and recommending improvements to management processes.
3. Tax Audit
It becomes mandatory under the Income Tax Act, 1961, when a company’s turnover exceeds ₹1 crore or ₹10 crore for companies with significant digital transactions. The main objective is to ensure accurate tax reporting and adherence to income tax laws and provisions.
4. Cost Audit
It applies to companies operating in specific industries, such as manufacturing or telecommunications, as notified by the Central Government. This audit examines cost accounting records and cost statements to ensure that the company is maintaining cost efficiency and following prescribed norms.
Eligibility for Conducting a Private Limited Audit
Only a Chartered Accountant (CA) in practice who is registered with the Institute of Chartered Accountants of India (ICAI) is legally authorised to conduct a statutory audit.
Eligibility criteria include:
- Valid ICAI membership.
Holding a Certificate of Practice (COP). - Independent of the company (not an employee or related party).
Who Signs the Private Limited Audit Report?
The audit report must be signed by the appointed Statutory Auditor, who is a qualified Chartered Accountant. The CA must include:
- Their name and membership number.
- Firm registration number (if applicable).
- Date and place of signing.
Only the auditor appointed by the company in accordance with the law can legally sign the report.
Appointment of an Auditor
As per Section 139 of the Companies Act, 2013,
- The first auditor must be appointed by the Board of Directors within 30 days of incorporation.
- Subsequent auditors are appointed by shareholders at the AGM for a term of five years.
- The company must file Form ADT-1 with the ROC within 15 days of appointment.
What is the Due Date of a Private Limited Company Audit?
The audit must be completed before the Annual General Meeting (AGM). For companies following the April-March financial year, the audit must typically be completed by September 30 of the following financial year.
In case of a delayed audit, the company and its officers may face penalties ranging from ₹25,000 to ₹5 lakh. Auditors may also be held liable for professional misconduct.
ROC Forms for Audit Requirements
Related Read: What is ROC Filing & Why It's Necessary?
Documents Required in Private Limited Audit Report
Auditors require the following documents for conducting the audit:
- Audited Balance Sheet and Profit & Loss Statement
- Trial balance
- Ledger accounts
- Bank statements and reconciliations
- Fixed asset register
- Invoices (sales and purchase)
- Loan agreements
- GST returns and tax filings
- Previous audit reports (if applicable)
- Board meeting minutes
Contents of the Auditor’s Report for Private Limited Audit
The auditor’s report typically includes:
- Opinion on the fairness and accuracy of financial statements.
- Compliance with accounting standards and laws.
- Commentary on internal control effectiveness.
- Observations or qualifications (if any).
- Auditor’s name, membership number, signature, and date.
Step 1: Visit the Official FSSAI Website
Head over to the official Food Safety Compliance System (FoSCoS) portal: https://foodlicensing.fssai.gov.in
Step 2: Create an Account
Click on “Sign Up” and fill in your details like name, mobile number, email ID, and state of operation. Once registered, you’ll receive login credentials via email or phone.
Step 3: Fill in the Application Form
After logging in, choose the appropriate license type based on your business size and turnover (Basic, State, or Central). Then, fill in the required details such as:
- Business name and address
- Type of food business (manufacturer, distributor, caterer, etc.)
- Contact information
- Business turnover and food handling capacity
Step 4: Upload Required Documents
Upload scanned copies of all the necessary documents.
Step 5: Pay the Application Fee
Once the form is complete and documents are uploaded, proceed to pay the applicable fee online. The amount depends on the license type and duration selected (1–5 years).
Step 6: Submit the Application
Double-check all details before clicking “Submit”. Once submitted, you’ll receive an application reference number which you can use to track your status.
Step 7: Track Your Application Status
Use the “Track Application” feature on the dashboard to monitor progress. You’ll receive notifications if additional info or documents are required.
Once submitted, your application will be reviewed by the local food safety officer. They may conduct a physical inspection (for licenses) or approve the application directly (for Basic Registrations). Upon approval, you’ll receive your FSSAI certificate online.
Process for Conducting a Private Limited Audit
The audit process for a Private Limited Company involves multiple well-defined steps to ensure financial accuracy, legal compliance, and transparency. Below is the step-by-step flow:
Step 1: Audit Planning
- Understand the nature of the business, industry specifics, and existing internal controls.
- Define the scope, materiality thresholds, and timeline for the audit.
- Develop an audit strategy and allocate resources accordingly.
Step 2: Preliminary Review & Risk Assessment
- Review previous audit reports, financial statements, and key transactions.
- Identify high-risk areas that may require additional scrutiny.
- Finalise audit procedures based on the assessed risk.
Step 3: Fieldwork and Evidence Collection
- Inspect primary financial records like ledgers, journals, cash books, and bank statements.
- Verify supporting documents such as invoices, purchase orders, tax returns, and payroll data.
- Confirm physical assets, inventory, and liabilities where applicable.
Step 4: Evaluation of Internal Controls
- Assess the adequacy and effectiveness of the company’s internal control systems.
- Detect any control lapses or non-compliance with statutory norms.
- Recommend improvements to strengthen the internal framework.
Step 5: Drafting the Audit Report
- Compile audit findings, observations, and any qualifications or adverse remarks.
- Engage with the management for clarification or additional data where required.
- Prepare the audit report as per the format prescribed under the Companies Act, 2013.
Step 6: Final Report Submission
- Submit the signed audit report to the company’s board or shareholders.
- Ensure timely filing of necessary forms like AOC-4 and MGT-7 with the Registrar of Companies (ROC).
Conclusion
For many founders, audits can seem intimidating or purely bureaucratic. But in reality, they’re a powerful tool that helps you take control of your business finances. A thorough audit not only ensures you're playing by the rules- it also gives you deeper insights into where your money is going, how your company is performing, and where the risks lie.
Whether it's a statutory audit mandated by the Companies Act, a tax audit required under the Income Tax Act, or an internal audit to strengthen operations, each type plays a distinct role in reinforcing the company’s foundation. Audits help catch errors early, uncover inefficiencies, and mitigate risks before they become serious problems.
In the long run, a well-audited company is a well-governed company.
Frequently Asked Questions
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
Limited Liability Partnership
(LLP)
- Professional services
- Firms seeking any capital contribution from Partners
- Firms sharing resources with limited liability
One Person Company
(OPC)
- Freelancers, Small-scale businesses
- Businesses looking for minimal compliance
- Businesses looking for single-ownership
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
One Person Company
(OPC)
- Freelancers, Small-scale businesses
- Businesses looking for minimal compliance
- Businesses looking for single-ownership
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
Limited Liability Partnership
(LLP)
- Professional services
- Firms seeking any capital contribution from Partners
- Firms sharing resources with limited liability
Frequently Asked Questions
Does a private company need an audit?
Yes, under the Companies Act, 2013, every private limited company in India is required to get its financial statements audited annually by a qualified Chartered Accountant. This statutory audit ensures that the financial records give an accurate and fair view of the company’s financial position.
Is a tax audit compulsory for a Private Limited company?
Tax audit is mandatory for private limited companies if their turnover exceeds ₹1 crore in a financial year (₹10 crore in certain cases involving digital transactions). It is conducted under the Income Tax Act, 1961, to verify compliance with tax provisions and proper maintenance of books of accounts.
What is the audit fee for private companies in India?
Audit fees vary based on the company’s size, complexity of accounts, and location. Typically, audit fees for private limited companies can range anywhere from ₹25,000 to several lakhs per year. The exact fee is negotiated between the company and the auditor.
Who is exempted from audit?
Certain small companies and one-person companies (OPCs) meeting specific criteria (like paid-up capital and turnover thresholds) may be exempt from mandatory audits under the Companies Act. Additionally, some entities may be exempt under the Income Tax Act depending on turnover and other conditions.
What is the difference between a tax audit and a company audit?
- Company Audit (Statutory Audit): Conducted under the Companies Act, 2013, to ensure the financial statements are accurate and comply with accounting standards. It focuses on overall financial health and regulatory compliance.
- Tax Audit: Conducted under the Income Tax Act, 1961, to verify the correctness of income and deductions declared in the tax returns, ensuring compliance with tax laws.
