Statutory Audit of Companies — Companies Act, 2013

Updated: 16 July 2026 | FY 2025-26

Statutory audit is the mandatory annual audit of a company's financial statements under Sections 139–147 of the Companies Act, 2013. It applies to every company — private limited, public limited, OPC and Section 8 — regardless of turnover or profit, unlike tax audit which is turnover-based. The audit must be conducted by an independent practising Chartered Accountant / CA firm appointed as the company's auditor, and audited financials must be ready before the AGM — held within 6 months of the financial year end (by 30 September) — and for AOC-4 / MGT-7 filings with the ROC.

30 Sep 2026 Last date to hold the AGM for FY 2025-26 (within 6 months of FY end). Audited financial statements must be adopted at the AGM — start the audit well before this date.

What is Statutory Audit?

A statutory audit is an independent examination of a company's books of account and financial statements, required by law — specifically Chapter X (Sections 139 to 147) of the Companies Act, 2013. The statutory auditor verifies whether the financial statements give a true and fair view of the company's state of affairs and reports to the shareholders under Section 143.

The key point most new founders miss: statutory audit has no turnover threshold. A private limited company with zero revenue in its first year still needs its accounts audited before it can hold its AGM and file its annual returns. This is a fundamental difference from tax audit under Section 44AB, which applies only above specified turnover limits.

Who Needs Statutory Audit — Applicability

Entity Type	Statutory Audit Required?	Governing Law
Private Limited Company	Yes — every year, regardless of turnover	Companies Act, 2013 (Sec 139–147)
Public Limited Company	Yes — every year, regardless of turnover	Companies Act, 2013 (Sec 139–147)
One Person Company (OPC)	Yes — every year, regardless of turnover	Companies Act, 2013 (Sec 139–147)
Section 8 (Not-for-Profit) Company	Yes — every year, regardless of turnover	Companies Act, 2013 (Sec 139–147)
LLP	Only if turnover > ₹40 lakh OR contribution > ₹25 lakh	LLP Act, 2008 read with LLP Rules
Proprietorship / Partnership Firm	No statutory audit — only tax audit if 44AB limits crossed	Income Tax Act, 1961 (Sec 44AB)

Appointment of the Statutory Auditor

First auditor — within 30 days of incorporation
The Board of Directors appoints the first auditor within 30 days of registration of the company (Section 139(6)). If the Board fails, the members must appoint one within 90 days at an extraordinary general meeting. The first auditor holds office until the conclusion of the first AGM.
Subsequent auditor — appointed at the AGM for 5 years
At the first AGM (and thereafter), the company appoints an auditor to hold office from the conclusion of that AGM till the conclusion of its sixth AGM — a 5-year term (Section 139(1)). Listed companies and certain large companies must also rotate auditors: an individual auditor for a maximum of one 5-year term and an audit firm for two 5-year terms (Section 139(2)).
Form ADT-1 — filed with ROC within 15 days
The company must intimate the auditor's appointment to the Registrar of Companies by filing Form ADT-1 within 15 days of the meeting in which the auditor is appointed.
Eligibility — practising CA / CA firm only
Only a Chartered Accountant in practice can be appointed (Section 141). A firm — including an LLP — qualifies if the majority of its partners practising in India are Chartered Accountants; only CA partners sign the audit report. Officers, employees and persons with prescribed financial interests in the company are disqualified.

What Does the Statutory Audit Cover?

The statutory auditor examines and reports on the following, in line with Section 143 and the Standards on Auditing:

Books of account — whether proper books as required by law have been kept, supported by vouchers, ledgers and bank reconciliations.
Financial statements — balance sheet, statement of profit & loss, cash flow statement (not mandatory for OPCs, small companies and dormant companies), statement of changes in equity where applicable, and notes — prepared per Schedule III and applicable accounting standards.
Internal financial controls — reporting on the adequacy and operating effectiveness of internal financial controls over financial reporting (Section 143(3)(i)), with exemptions for OPCs, small companies and certain smaller private companies.
CARO 2020 reporting — clause-wise reporting on fixed assets, inventory, loans and advances, statutory dues, repayment defaults, fraud and other prescribed matters, where the Companies (Auditor's Report) Order, 2020 applies.
Fraud reporting — the auditor must report frauds by officers or employees to the Board/Audit Committee, and frauds of ₹1 crore or more to the Central Government (Section 143(12)).

Statutory Audit vs Tax Audit vs Internal Audit

Parameter	Statutory Audit	Tax Audit	Internal Audit
Governing law	Companies Act, 2013 (Sec 139–147)	Income Tax Act, 1961 (Sec 44AB)	Companies Act, 2013 (Sec 138)
Applicability	Every company, regardless of turnover	Turnover > ₹1 Cr / ₹10 Cr (digital); profession > ₹50 lakh	Listed companies and prescribed classes of large companies
Who conducts it	Independent practising CA / CA firm appointed as auditor	Practising Chartered Accountant	CA, CMA or other professional decided by the Board
Output	Audit report to shareholders (with CARO annexure where applicable)	Form 3CA/3CB + Form 3CD on income tax portal	Internal reports to Board / Audit Committee
Deadline anchor	Before AGM — held by 30 September (within 6 months of FY end)	30 September following the financial year	Ongoing / periodic, as fixed by the Board
Purpose	True and fair view for shareholders and regulators	Verification of accounts for income tax purposes	Risk management and internal process improvement

Statutory Audit Timeline — FY 2025-26

Milestone	Timeline	Notes
Financial year end	31 March 2026	Close books; complete year-end adjustments and reconciliations
Audit fieldwork & finalisation	April – August 2026	Financial statements prepared, audited and signed before AGM notice
AGM (adoption of audited accounts)	By 30 September 2026	Within 6 months of FY end (first AGM: within 9 months of first FY end). AGM provisions do not apply to OPCs
Form AOC-4 (financial statements)	Within 30 days of AGM	Audited financials filed with ROC; OPCs file within 180 days of FY end
Form MGT-7 / MGT-7A (annual return)	Within 60 days of AGM	MGT-7A applies to OPCs and small companies

Late filing of AOC-4 or MGT-7 attracts an additional fee of ₹100 per day per form with no upper limit — and the ROC filings simply cannot happen without audited financial statements. See our guides on annual compliance for private limited companies and annual filing of LLPs.

Penalties for Non-Compliance

Default	Consequence
Contravention of audit provisions (Sec 139–146)	Company: fine ₹25,000 to ₹5,00,000; every officer in default: fine ₹10,000 to ₹1,00,000 (Section 147)
Late filing of AOC-4 / MGT-7	Additional fee of ₹100 per day per form, without any cap
Unaudited financials at AGM	Accounts cannot be validly adopted; annual filings blocked; directors exposed to default proceedings
Prolonged non-filing of annual returns	Risk of the company being marked for strike-off and directors being disqualified under Section 164(2)

How TaxClue Helps With Your Statutory Audit

The statutory audit opinion must come from an independent practising Chartered Accountant — that independence is the whole point of the audit. TaxClue's role is to make the audit fast and painless: we bring your books of account up to date, handle Schedule III financial statement preparation, prepare audit schedules, reconciliations and supporting documentation, coordinate and respond to auditor queries, and complete the ADT-1, AOC-4 and MGT-7 filings after the audit. Where you need an auditor, we coordinate with independent CA firms who issue the audit opinion.

If your company also crosses the Section 44AB thresholds, we manage the tax audit workstream in parallel so both audits share one document trail.

Frequently Asked Questions

Is statutory audit mandatory for a company with zero turnover?

Yes. Statutory audit under the Companies Act, 2013 applies to every company — private limited, public limited, One Person Company (OPC) and Section 8 company — irrespective of turnover, profit or business activity. Even a dormant company or a company with nil revenue must get its financial statements audited every year. This is different from tax audit under Section 44AB of the Income Tax Act, which is triggered only when turnover or gross receipts cross specified thresholds.

Who can be appointed as a statutory auditor?

Only a Chartered Accountant in practice can be appointed as statutory auditor under Section 141 of the Companies Act, 2013. A CA firm (including an LLP) may be appointed if the majority of its partners practising in India are qualified Chartered Accountants, and only the CA partners can sign the audit report. Certain persons are disqualified — for example, an officer or employee of the company, a person indebted to the company beyond prescribed limits, or a person holding securities of the company.

When must the first auditor be appointed and is ADT-1 required?

The Board of Directors must appoint the first auditor within 30 days of incorporation (Section 139(6)). If the Board fails, the members must appoint the first auditor within 90 days at an extraordinary general meeting. The first auditor holds office until the conclusion of the first AGM. For subsequent appointments made at the AGM, the company must file Form ADT-1 with the ROC within 15 days of the appointment. Filing ADT-1 for the first auditor appointed by the Board is generally treated as good practice rather than a strict requirement.

What is the difference between statutory audit and tax audit?

Statutory audit is conducted under the Companies Act, 2013 (Sections 139–147) on every company regardless of turnover, and the audit report is addressed to the shareholders and laid before the AGM. Tax audit is conducted under Section 44AB of the Income Tax Act only when business turnover exceeds ₹1 crore (₹10 crore if 95%+ transactions are digital) or professional receipts exceed ₹50 lakh, and the report (Form 3CA/3CB + 3CD) is filed on the income tax portal. A company that crosses the 44AB threshold needs both audits — often done by the same or different CA firms.

Do LLPs require statutory audit?

LLPs are governed by the LLP Act, 2008 — not by Sections 139–147 of the Companies Act. An LLP needs its accounts audited only if its annual turnover exceeds ₹40 lakh or its capital contribution exceeds ₹25 lakh. Below these limits, an LLP can file its Statement of Account & Solvency (Form 8) with a declaration from the partners instead of an audit. Companies, by contrast, need statutory audit from year one regardless of size.

What is CARO 2020 and does it apply to my company?

CARO 2020 (Companies (Auditor's Report) Order, 2020) requires the statutory auditor to report on specific matters — fixed assets, inventory, loans, statutory dues, defaults, fraud, internal audit and more — through detailed clauses in the audit report. It applies to most companies, but exempts banking and insurance companies, Section 8 companies, One Person Companies, small companies, and private companies meeting all prescribed criteria (not a holding/subsidiary of a public company, paid-up capital plus reserves up to ₹1 crore, borrowings up to ₹1 crore, and revenue up to ₹10 crore).

What is the penalty for not conducting statutory audit?

Under Section 147 of the Companies Act, 2013, contravention of the audit provisions (Sections 139 to 146) makes the company punishable with a fine of ₹25,000 to ₹5,00,000, and every officer in default with a fine of ₹10,000 to ₹1,00,000. Separately, filing AOC-4 or MGT-7 late attracts an additional fee of ₹100 per day per form with no upper cap, and unaudited financial statements cannot be validly adopted at the AGM or filed with the ROC.

Does TaxClue itself issue the statutory audit report?

No — and it should not. The statutory audit opinion must be issued by an independent practising Chartered Accountant / CA firm appointed as the company's auditor. TaxClue manages everything around the audit: finalising books of account, preparing Schedule III financial statements, reconciliations, audit schedules and documentation, coordinating auditor queries, and completing ADT-1, AOC-4 and MGT-7 filings — so the independent audit is completed smoothly and on time.

Statutory Audit Near You

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