A legally mandated examination of a company's financial statements by an independent auditor to verify they present a true and fair view.
Statutory Audit is required by law (Companies Act 2013 in India) for all registered companies. A Chartered Accountant (CA) in practice examines the financial statements, accounting records, internal controls, and supporting documents to express an opinion on whether the financials are free from material misstatement. The auditor issues one of four opinions: Unqualified (clean — all good), Qualified (mostly good, with specific exceptions), Adverse (fundamental disagreement), or Disclaimer (unable to form opinion). The audit report is presented to shareholders at the Annual General Meeting.
ABC Private Limited (turnover ₹25 crore) appoints CA firm as statutory auditor at the AGM. The CA firm: reviews all transactions, vouches samples, sends bank/debtor confirmations, checks inventory physically, tests internal controls, reviews GST/TDS compliance, and issues an Unqualified Opinion with a CARO report. Total audit fee: ₹2,00,000. Timeline: 2–3 weeks fieldwork.
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All companies registered under Companies Act (private and public, regardless of turnover), LLPs with turnover >₹40 lakh or contribution >₹25 lakh, Individuals/firms with turnover >₹1 crore (₹10 crore if 95% digital transactions), and various entities under specific acts (cooperative societies, trusts, NGOs with income >₹5 lakh). Section 44AB mandates tax audit thresholds.
Statutory Audit (Companies Act): Verifies financial statements show 'true and fair view'. Required for companies/LLPs. Tax Audit (Section 44AB of IT Act): Verifies income computation for tax purposes. Required when turnover exceeds ₹1 crore (₹10 crore for digital). Both done by CAs but serve different purposes — statutory for shareholders, tax audit for the Income Tax Department.
An independent evaluation conducted within a company to assess and improve the effectiveness of risk management, internal controls, and governance processes.
Formal records of a business's financial activities, comprising the Balance Sheet, Profit & Loss Statement, Cash Flow Statement, and Notes to Accounts.
The legal framework of laws, regulations, and filings that a business must adhere to, including tax filings, labor laws, corporate regulations, and industry-specific requirements.
A chronological record of all transactions and changes made in an accounting system, providing a traceable path for verification and compliance.
The application of accounting skills and investigative techniques to examine financial records for evidence of fraud, embezzlement, or disputes.
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