Executive Overview & Regulatory Intent

A Statutory Audit is a legally mandated audit of a company’s financial records. The primary objective is to provide reasonable assurance to shareholders, regulators, lenders, and stakeholders that the financial statements present a “true and fair view” of the company’s financial position, operational results, and cash flows.

Our audit methodology is designed to evaluate corporate risk, verify internal financial controls, and ensure adherence to statutory reporting frameworks under Indian and global accounting standards.

Applicable Legal & Regulatory Framework

The Companies Act, 2013: Compliance with Sections 139, 143, and other applicable provisions governing auditor appointment, duties, and reporting mandates.

Standards on Auditing (SAs): Conducted in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India (ICAI).

Financial Reporting Frameworks: Verification under Indian GAAP (AS) or Ind AS (Indian Accounting Standards converged with IFRS), depending on entity applicability.

Companies (Auditor’s Report) Order, 2020 (CARO 2020): Extended reporting obligations covering 21 detailed clauses including inventory, fixed assets, internal audit, loans/advances, and financial ratios.

Internal Financial Controls over Financial Reporting (IFCoFR): Mandatory evaluation and opinion under Section 143(3)(i) on the adequacy and operating effectiveness of internal financial control systems.

Scope of Work & Audit Methodology

Phase 1: Audit Planning, Strategy & Risk Assessment

Detailed study of the client’s business model, industry dynamics, and key accounting policies.
Determination of overall and performance materiality levels based on financial parameters (Revenue, Assets, PBT).
Identification and assessment of Risks of Material Misstatement (RMM) due to error or fraud (SA 240/315).

Phase 2: Evaluation of Internal Financial Controls (IFCoFR)

Documentation and walkthrough testing of core operational cycles:
- Procure-to-Pay (P2P)
- Order-to-Cash (O2C)
- Hire-to-Retire (Payroll)
- Record-to-Report (R2R)
Evaluation of IT General Controls (ITGC) and application controls within ERP systems (Tally, SAP, Oracle, Zoho Books).

Phase 3: Substantive Testing & Balance Sheet Verification

Inventory Verification: Direct attendance or verification of physical stock-taking procedures and valuation compliance (Ind AS 2 / AS 2).
Third-Party External Confirmations: Independent direct confirmations for bank balances, trade receivables, trade payables, loans, and legal claims (SA 505).
Revenue Recognition & Expense Cut-Off: Testing proper accounting period cut-offs for sales and expenses (Ind AS 115 / AS 9).

Phase 4: Finalization, Audit Committee Discussion & Reporting

Review of Subsequent Events (SA 560) and Going Concern assumptions (SA 570).
Discussion of key audit findings and unadjusted audit differences with the Audit Committee / Board of Directors.
Issuance of the formal Independent Auditor’s Report.

Key Deliverables to the Client

List the exact tangible documents the client receives upon completion of the engagement:

Independent Auditor’s Report: Formal audit opinion (Unmodified, Qualified, Adverse, or Disclaimer of Opinion) on the Financial Statements.
CARO 2020 Report: Comprehensive annexure report covering all applicable reporting clause under CARO 2020.
IFCoFR Report: Independent opinion on Internal Financial Controls over Financial Reporting under Section 143(3)(i).
Management Representation Letter (MRL): Formal documentation of management assertions (SA 580).
Management Letter / Communication to TCWG: Detailed report detailing identified internal control weaknesses, process gaps, and recommended corrective measures (SA 260 / SA 265).

Applicability Matrix (Who Requires a Statutory Audit?)

This section helps prospective clients determine whether this service applies to their specific entity structure:

Entity Type	Statutory Trigger / Threshold	Governing Law
Private Limited Companies	Mandatory for all companies regardless of turnover or capital.	Companies Act, 2013
Public Limited Companies	Mandatory for all public companies.	Companies Act, 2013
Section 8 (NGO/Non-Profit)	Mandatory for all Section 8 entities.	Companies Act, 2013
Foreign Subsidiaries in India	Mandatory for all Indian step-down/wholly-owned subsidiaries.	Companies Act, 2013 & FEMA
Limited Liability Partnerships (LLP)	Mandatory if turnover exceeds ₹40 Lakhs OR capital contribution exceeds ₹25 Lakhs.	LLP Act, 2008

Key Deliverables to the Client

List the exact tangible documents the client receives upon completion of the engagement:

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Finalized Trial Balance along with sub-ledgers and grouping sheets.
Year-end Bank Reconciliation Statements (BRS) with bank statements.
Physical inventory count tags and valuation sheets as of the balance sheet date.
Fixed Asset Register (FAR) reconciled with General Ledger.
Direct confirmation contact details for major customers, suppliers, and lenders.
Board Meeting Minutes, General Meeting Minutes, and Secretarial Registers.
Statutory Return Copies (GSTR-3B, GSTR-9, TDS Returns, PF/ESI Challans).

Frequently Asked Questions

Under Section 139(2) of the Companies Act, 2013, listed companies and specified unlisted public/private companies must rotate individual auditors after 1 term of 5 consecutive years, and audit firms after 2 terms of 5 consecutive years (10 consecutive years), followed by a mandatory 5-year cooling-off period.

CARO 2020 is a statutory reporting order that requires auditors to report on 21 specific operational and financial parameters. It applies to all companies including private limited companies, except those private companies that meet all three conditions: paid-up capital & reserves ≤ ₹1 Crore, borrowings from banks/FIs ≤ ₹1 Crore, and total revenue ≤ ₹10 Crores during the financial year.

For non-transfer pricing companies, the statutory audit must be completed before the Annual General Meeting (AGM), which must be held by September 30th following the end of the financial year. The financial statements must then be filed with the ROC in Form AOC-4 within 30 days of the AGM.