Types of Audit in India: Statutory, Internal, Tax, and More

The primary types of audits in India include statutory audit, internal audit, tax audit, cost audit, and secretarial audit. Each serves a distinct purpose and is governed by specific laws. Statutory audit is mandatory for all companies under Section 143 of the Companies Act, 2013, and is conducted by a chartered accountant to verify financial statements. Internal audit is required for certain classes of companies as per Section 138, focusing on operational efficiency and internal controls. Tax audit under Section 44AB of the Income Tax Act, 1961, applies to businesses exceeding specified turnover thresholds. Cost audit is mandated for companies engaged in production of goods where cost records are prescribed, and secretarial audit applies to listed companies and larger unlisted public companies under Section 204.

A statutory audit is a legally required examination of a company's financial records and statements. Under Section 143 of the Companies Act, 2013, every company must appoint an auditor to conduct this audit annually. The auditor, who must be a chartered accountant from the Institute of Chartered Accountants of India (ICAI), examines whether the financial statements present a true and fair view of the company's affairs. The audit report must include observations on compliance with accounting standards, internal financial controls, and any fraud detected. Statutory audit applies to all companies registered under the Companies Act, regardless of size or turnover, though one-person companies and small companies have certain relaxations in reporting requirements.

A tax audit is specifically required under Section 44AB of the Income Tax Act, 1961, for businesses with total sales, turnover, or gross receipts exceeding ₹1 crore in a financial year (₹10 crore for businesses where cash receipts and payments do not exceed 5% of total). For professionals, the threshold is ₹50 lakh. The tax auditor verifies that the taxpayer has maintained proper books of account and that the income computed by the auditor matches the income declared in the tax return. Unlike statutory audit which focuses on financial statement accuracy, a tax audit ensures compliance with tax laws, including verification of TDS deductions, presumptive taxation provisions, and disallowances under the Income Tax Act. The tax audit report must be filed in Form 3CA/3CB and Form 3CD by November 30 of the assessment year.

Internal audit is mandatory for certain classes of companies under Rule 13 of the Companies (Accounts) Rules, 2014, read with Section 138 of the Companies Act, 2013. The requirement applies to all listed companies, unlisted public companies with paid-up share capital of ₹50 crore or more, turnover of ₹200 crore or more, or outstanding loans/borrowings of ₹100 crore or more. Private companies meeting these thresholds are also covered. Additionally, companies covered under the Companies Act, 2013, that are required to maintain cost records under Section 148 must conduct internal audit. The internal auditor may be a chartered accountant, cost accountant, or other qualified professional, and the audit covers operational efficiency, risk management, and internal control systems. The internal audit report is submitted to the board of directors and the audit committee.

Cost audit is mandated under Section 148 of the Companies Act, 2013, for companies engaged in production, processing, manufacturing, or mining activities where the Central Government has prescribed cost records. The cost auditor, a cost accountant from the Institute of Cost Accountants of India, verifies cost accounting records and compliance with cost accounting standards. This audit applies to companies in sectors like pharmaceuticals, cement, steel, and automobiles. Secretarial audit under Section 204 applies to all listed companies and every other public company with paid-up share capital of ₹50 crore or more or turnover of ₹250 crore or more. The secretarial auditor, a company secretary from the Institute of Company Secretaries of India, examines compliance with the Companies Act, securities laws, and other applicable regulations. Both audits require filing reports with the Registrar of Companies within specified timelines.

If your business meets any of the thresholds mentioned above, you must engage a qualified professional—chartered accountant, cost accountant, or company secretary—to conduct the applicable audit. Consult a professional to determine which audits apply to your entity and to ensure timely compliance with filing deadlines.

This page provides preliminary information. It is not legal advice. For your matter, consult a qualified professional.