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Preface: This post was originally published in 2019 and has been updated on January 16, 2026, to provide you with the most current and accurate information.
Auditing refers to the process of conducting an official financial inspection of a business. That business can be anything from a company to a sole proprietorship to a partnership. There is not just one, but many types of audits in India, and each type of audit serves a unique purpose.
In this blog post, we shall explain to our readers the various types of audits conducted in the country. If you’re planning to register a company in the near future, we recommend you to go through this post!
The objectives of an audit are as follows :-
A statutory audit helps to ensure the financial health of a company is exactly as the company portrays it to be. In case of any discrepancy/misstatement, the same would be mentioned in the audit report.
It helps protect the public and investors from fraud by ensuring a company’s financial statements are accurate and in compliance with the law.
Internal audit allows the company to identify its weaknesses and other internal issues and work on them.
There are many audit types in India, and all of them can be categorized into two basic categories based on who conducts them, i.e., (i) Statutory Audit, and (ii) Internal Audit. The statutory audit is conducted by independent parties. On the other hand, the internal audit is conducted either by internal employees or external professionals.
Statutory audits are external audits conducted to check the financial state of the company/business. The statutory audit report contains the auditor's opinion on whether the financial statements present a true and fair picture, and is made as per the directions and forms provided by the government. Qualified auditors working as external or independent parties take up the task of statutory audit.
Internal audits are conducted with the aim to improve the internal control and operations of a company. The internal audit report contains the shortcomings of the company and provides recommendations for improvement.
Internal employees or external professionals like consultants/CAs/Cost Accountants are responsible for conducting the internal audits.
There are two common types of statutory audits that a company has to conduct each financial (fiscal year). They are as follows :-
A tax audit is a requirement under the Section 44AB of India’s Income Tax Act 1961. It is mandatory for every business with an annual turnover of over INR 1 Crore and for every professional with gross receipts more than INR 50 lakhs per year.
The tax audit report has to be filed in the prescribed format by the prescribed due date every year. If the required person or the business fails to file the report, they have to face a penalty equal to 0.5 percent of total sales/turnover/gross receipts or INR 1,50,000, whichever is less.
The details and provisions of company audits are explained in detail in the Companies Act, 2013. The Act states that every company, irrespective of its annual turnover or business type, has to get its financial accounts audited by a qualified professional (auditor).
As per the company law, you can appoint a company auditor for the duration of 6 annual general meetings.
There are several types of internal audits. So many in fact, that picking the most important among them is difficult. Below, we have provided you with a brief introduction of some of the most common audit types of internal audit in India :-
Operational audit is conducted to evaluate the efficiency of a particular aspect, function or department of a business. It doesn’t always require financial data, but requires the information about whether the department/function/aspect is performing its tasks properly.
There are many types of compliances that a company or any other type of business has to follow to stay in business. The compliance audit is done to check whether the company is following the rules and regulations set up by the government.
A financial audit is conducted to check the fairness, accuracy and reliability of the financial data. There are several companies that falsify their financial information to get better PR and mislead the public and investors.
Financial auditing ensures that such fraudulent tactics don’t work. Because accuracy and fairness are needed, independent contractors take up the task to conduct unbiased financial auditing.
Investigative audit takes place when there is some suspicious activity in the business entity’s finances. In other words, it’s done if there is something wrong in the financial details of the business. Another reason to do investigative audits is to assess the risk factors of the business.
Management audit is done by independent contractors who provide insight of the management structure of the business. Similar to operational audit, management audit is done to check the performance of business as a whole.
Auditing is a process to check the financial and legal health of the business. In hindsight, it’s a boring task. Nevertheless, it’s necessary to ensure that your company stays afloat, both in the eyes of the Indian government, and the people. Need assistance in company auditing? Connect with auditing experts at Registrationwala for assistance.
Also Read :- What is the Role of Chartered Accountants in Forensic Auditing?
Q1. Who conducts tax audits in India?
A. In India, ICAI-registered chartered accountants are responsible for conducting tax audits. Cost accountants and company secretaries are not authorized to conduct tax audits.
Q2. Can internal audits of a company be conducted by its own employees?
A. Yes, the internal audits of a company can be conducted by its own employees.
Q3. Are statutory audits external audits?
A. Yes, the statutory audits are external audits. They are conducted by independent, external auditors.
Q4. Which companies need to conduct statutory audits?
A. Under the Companies Act, every company, regardless of its turnover and type, must conduct statutory audits.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
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