Once a private limited company is incorporated, it must adhere to several compliance obligations under the Companies Act, 2013. One such essential requirement is the conduct of an audit, which is mandatory regardless of the company’s turnover or business activity.
An audit involves the examination of a company’s financial records to verify their accuracy. The company must appoint an auditor to carry out this process. The primary aim of auditing the financial statements is to enable the auditor to provide an independent opinion.
The auditor evaluates various financial documents, including books of account, vouchers, and invoices, to ensure they are correctly recorded and maintained. Conducting an annual audit is a compulsory compliance measure under the Companies Act and the relevant Company Law Rules.
Types of Audits in a Private Limited Company
Private limited companies are subject to different kinds of audits, each serving a specific purpose. Below are the key types:
Statutory Audit
A statutory audit is a compulsory audit that every private limited company must undertake each financial year, regardless of whether the company has made a profit or incurred a loss. This audit must be conducted in accordance with the Companies Act and the Companies (Accounts) Rules, 2014.
The goal of the statutory audit is to assess whether the financial records give a true and fair view of the company’s financial position, based on the information from the books of account, bank statements, and financial reports.
Internal Audit
Internal audits are initiated by the company’s own management. As per the Companies Act and the Companies (Accounts) Rules, 2014, certain companies are mandated to appoint internal auditors. The following private limited companies must conduct internal audits:
- Companies with a turnover of ₹200 crore or more in the preceding financial year
- Companies with borrowings from banks or public financial institutions exceeding ₹100 crore
Internal audits aim to review financial health and operational effectiveness, enabling management to make informed decisions for better efficiency.
Cost Audit
Under the Companies (Cost Records and Audit) Rules, 2014, specific private limited companies must undertake cost audits. These include:
- Companies involved in manufacturing or services listed in Table 3(A) with:
- A total annual turnover of ₹50 crore or more
- A turnover of ₹25 crore or more for individual services or products
- A total annual turnover of ₹50 crore or more
- Companies engaged in activities listed in Table 3(B) with:
- A total annual turnover of ₹100 crore or more
- A turnover of ₹35 crore or more for individual services or products
- A total annual turnover of ₹100 crore or more
Cost audits help ensure accurate recording of production or service costs and are critical for cost control and pricing decisions.
Appointment of an Auditor
Statutory Auditor
Every private limited company is required to appoint its first statutory auditor within 30 days from the date of incorporation. During the first Annual General Meeting (AGM), the shareholders must approve this appointment. The auditor, once confirmed, will serve for a term of five years. Only an independent practicing Chartered Accountant (CA), a CA firm, or an LLP with a majority of partners practicing in India can be appointed as the company’s statutory auditor.
Internal Auditor
Internal audits can be carried out either by in-house personnel or an external professional. The individual conducting the internal audit must be a CA, a cost accountant, or another qualified expert as approved by the board. Internal auditors may also be company employees.
Cost Auditor
Private limited companies subject to cost audit under the Companies (Cost Records and Audit) Rules, 2014 must appoint a cost auditor within 180 days from the beginning of the financial year. Only a practicing cost accountant—defined under Section 2(1)(b) of the Cost and Works Accountants Act, 1959—can be appointed. This includes individual practitioners, firms, or LLPs of cost accountants.
Due Dates for Private Limited Company Audits
Statutory Audit
The statutory audit must be completed before the AGM is held. The auditor’s report must be submitted to the board in advance and filed with the Registrar of Companies (ROC) along with the financial statements. The deadlines are as follows:
- Form AOC-4 (financial statements with audit report) must be filed within 30 days from the AGM date.
- Form MGT-7 (annual return) must be submitted within 60 days from the AGM.
- The AGM must be held on or before 30th September each year.
Internal Audit
There is no fixed deadline for conducting the internal audit. However, the internal auditor should submit the audit findings to the board prior to the AGM. The audit report is to be attached with Form AOC-4.
Cost Audit
The cost audit report must be presented to the board by 30th September each year using Form CRA-3. Once reviewed, the board is required to file the report with the Central Government within 30 days of receipt using Form CRA-4, along with the necessary details.
ROC Forms Related to Audit Compliance for Private Limited Companies
Private limited companies are required to file specific forms with the Registrar of Companies (ROC) to meet their audit-related obligations. The key ROC forms involved are listed below:
| Form | Purpose |
| Form ADT-1 | To notify the appointment of the statutory auditor |
| Form AOC-4 | For annual filing of the company’s financial statements |
| Form MGT-7 | For submitting the annual return of the company |
| Form CRA-2 | To appoint a cost auditor |
| Form CRA-3 | To submit cost audit records to the board |
| Form CRA-4 | To file the cost audit report with the authorities |
Failure to file these forms or submit the required audit and cost audit reports can lead to penalties. Hence, it is mandatory for every private limited company to conduct a statutory audit. Internal and cost audits are also necessary when the company meets the specific conditions outlined in the relevant rules.
FAQs – Auditing Requirements of Private Limited Company
1. Is audit mandatory for all private limited companies, even with no revenue?
Yes, as per the Companies Act, 2013, a statutory audit is mandatory for every private limited company, regardless of its turnover, profit, or loss.
2. Who can be appointed as a statutory auditor for a private limited company?
Only a practicing Chartered Accountant (individual or firm/LLP with majority Indian partners) can be appointed as a statutory auditor.
3. What is the due date for completing a statutory audit?
The statutory audit must be completed before the Annual General Meeting (AGM), which must be held on or before 30th September each financial year.
4. What are the consequences of not filing ROC audit forms like AOC-4 or MGT-7?
Non-filing can result in penalties and additional fees. It may also impact the company’s legal standing and credibility.
5. When is internal audit mandatory for a private limited company?
Internal audit is required if the company meets any of the prescribed thresholds, such as turnover of ₹200 crore or more, or borrowings exceeding ₹100 crore.
6. What is the purpose of a cost audit in a private company?
Cost audits help evaluate and verify cost records to ensure efficient pricing and resource management, especially for companies involved in manufacturing or regulated services.
7. Can a company employee be appointed as an internal auditor?
Yes, the internal auditor may be an employee or an external professional, as long as they meet the qualification criteria.
8. What is Form ADT-1 used for?
Form ADT-1 is used to inform the ROC about the appointment of the statutory auditor by the company.
9. When should Form CRA-2 be filed?
Form CRA-2, for cost auditor appointment, must be filed within 180 days from the beginning of the financial year.
10. Is it mandatory to file Form CRA-4 every year?
Only companies falling under the cost audit requirement as per the Companies (Cost Records and Audit) Rules need to file Form CRA-4 annually.
