Statutory Audit for Private Limited Companies: Guide

Unlike a tax audit, which depends on turnover, a statutory audit is compulsory for every company registered under the Companies Act, 2013. That includes a newly formed private limited company with zero revenue, a one person company, and a dormant company that hasn’t been struck off. The auditor’s report is filed with the ROC along with the financial statements, so it is a public record of your company’s health.

Is it mandatory?

Yes. Section 139 requires every company to appoint an auditor, and section 143 requires the auditor to report on the financial statements. There is no turnover exemption.

Appointing the auditor

Event	Who appoints	Time limit	Filing
First auditor (new company)	Board of directors	Within 30 days of incorporation. If the board fails, members appoint within 90 days at an EGM	Intimation to the auditor. ADT-1 is not required for the first auditor
Subsequent auditor	Shareholders at the first AGM	At the AGM, for a term of 5 years (up to the 6th AGM)	Form ADT-1 within 15 days of the AGM
Casual vacancy (resignation)	Board (and members, if caused by resignation)	Within 30 days	ADT-1. The resigning auditor files ADT-3

Rotation: individual auditors can serve a maximum of 1 term (5 years) and firms 2 terms (10 years) in listed and specified larger companies. Most small private companies are exempt from rotation.

What the statutory audit covers

The auditor examines whether the financial statements give a true and fair view, following the Standards on Auditing (SAs) issued by ICAI:

Balance sheet, profit and loss account, cash flow statement (small companies and OPCs may be exempt from the cash flow statement) and notes
Compliance with Schedule III formats and Accounting Standards
Internal financial controls reporting, from which small companies, OPCs and private companies with turnover under ₹50 crore and borrowings under ₹25 crore are exempt
Audit trail (edit log) in the accounting software: since 1 April 2023, companies must use software that records an audit trail of every change, and the auditor reports on it
CARO 2020 reporting, if applicable

CARO 2020 applicability

CARO 2020 requires the auditor to report on about 21 matters (fixed assets, inventory, loans, statutory dues, frauds, and so on). It applies to most companies but not to a private company that meets all of these:

not a subsidiary or holding company of a public company
paid-up capital and reserves ≤ ₹1 crore
borrowings ≤ ₹1 crore from banks or financial institutions at any time in the year
revenue ≤ ₹10 crore

CARO also doesn’t apply to OPCs and small companies. A small company now has paid-up capital up to ₹10 crore and turnover up to ₹100 crore, as revised from 1 December 2025.

The audit process, step by step

Engagement letter setting scope, timelines and fees.
Planning and risk assessment: understanding the business, key risks and materiality.
Fieldwork: vouching, verification of assets and liabilities, bank and party confirmations, stock observation, and review of statutory compliance.
Management representation letter.
Draft financial statements and discussion of adjustments.
Board approval of financial statements. Directors sign, and the auditor signs the audit report with a UDIN.
AGM (by 30 September) adopts the accounts.
ROC filing: AOC-4 within 30 days of the AGM and MGT-7/7A within 60 days (see our ROC compliance article).

Documents to keep ready

Trial balance, ledgers, and bank statements with reconciliations
Sales and purchase registers and GST returns (GSTR-1, 3B, 2B reconciliations)
Fixed asset register with invoices for additions
Loan agreements, sanction letters, and confirmations from lenders and directors
Stock statements and the valuation method
Statutory dues: TDS, GST, PF/ESI, professional tax, and payment challans
Minutes of board and general meetings, and the statutory registers
Share capital records: allotment, transfers, share certificates
Related-party transactions list and approvals
Previous year’s audited accounts and ROC filings

Statutory audit vs tax audit

	Statutory audit	Tax audit
Law	Companies Act, 2013 (s.139–148)	Income-tax Act (s.44AB / s.63 of 2025 Act)
Applies to	All companies	Businesses/professionals above turnover limits
Purpose	True and fair view of the financial statements	Correct computation of taxable income
Appointed by	Board (first) / shareholders	The taxpayer
Report	Auditor’s report + CARO, filed with the ROC	Form 3CA/3CB + 3CD (Form 26), filed with the tax department
Deadline	Before the AGM (by 30 Sep)	Tax audit due date (30 Sep, extended for AY 2026-27)

A company above the tax audit limit needs both. They are usually done by the same firm, one after the other.

Frequently asked questions

Our company had no business this year. Do we still need an audit?
Yes. Every company needs a statutory audit and must file AOC-4 and MGT-7/7A, even with nil transactions. If the company is inactive, consider dormant status or strike off.

What if we don’t appoint an auditor?
The company and every officer in default face penalties under section 147, and ROC filings can’t be completed without audited accounts. Late filings attract ₹100 per day additional fees.

Can a director’s relative be the auditor?
No. Section 141 disqualifies relatives of directors and persons with specified business or financial relationships with the company.

Need a statutory auditor for your company? Garvita Jain & Co. carries out statutory audits for private limited companies and OPCs, including CARO reporting, audit-trail review and ROC filing support. Contact us here, or at contact@garvitajainandco.com or +91 98678 16597.

This article is general information based on the law as of November 2026 and is not professional advice.

Sources

Official

Professional / CA publications

Statutory Audit for Private Limited Companies: What It Involves and How to Prepare