Does a small private company need a statutory audit?

The audit is compulsory

The Companies Act has no turnover limit for statutory audit. A company with nil turnover still needs audited financial statements to file AOC-4. This is different from an LLP or a partnership firm, where audit depends on turnover.

Appointing the auditor

• First auditor: appointed by the board within 30 days of incorporation. If the board does not, the members appoint one within 90 days.
• Later auditors: appointed at the first AGM, for a term of five years, with ADT-1 filed within 15 days.
• The auditor must be a Chartered Accountant in practice or a firm, and must not be disqualified under section 141, for example by being related to the company or holding its shares.

What small companies are spared

What still applies to everyone

• The audit follows the Standards on Auditing.
• Audit trail: since 1 April 2023, accounting software must keep an edit log that cannot be disabled, and the auditor reports on it.
• The auditor reports on the matters in section 143(3), including whether proper books are kept.
• The auditor of a company cannot provide services barred by section 144, such as bookkeeping or internal audit, to that company.

Tax audit is separate

A company with turnover above the income-tax limit also needs a tax audit under section 63 of the Income-tax Act, 2025 (formerly 44AB). See tax audit limits.