It is mandatory for every company registered under the companies Act 2013 or the LLP registered under the LLP act 2008 to undergo the procedure of Audit. To simply state we can say that audit is the procedure of examining the financial books of the company to determine whether they provide the true and fair value or not. Also, one another objective of audit is to detect the presence of any error and frauds in the books of accounts. According to the various rules and regulations, it is being made mandatory for the certain companies to undergo an audit and get their books of accounts examined. Through this article we will be discussing what is audit and how is it an imperative process for company annual compliances.
What is an Audit?
Audit is the procedure of examining the books of accounts of the company carefully followed by the physical verification of assets ensuring the correctness of the financial records of the company. The audit procedure performed ensures that all the departments in the organization works in a effective manner and minimal error is there in the books of accounts.
What are the advantages of audit?
There are manifold benefits of audit that helps to add value to the companies and make them work in an effective manner. Here are some of the major benefits associated with the activity of audit –
- Ensures that books of account are true and fair.
- The books of account are free from any frauds and defects.
- Assists in effective and efficient use of resources.
- Helps in detecting the performance of the employees.
- Helps in the overall growth of the company.
Who performs the function of audit in an organization?
The audit is a complex activity that requires the expert and experienced opinion for its correctness. There are various kinds of audit that are performed by the professionals within the organization and outside the organization. To keep a check on the books of accounts an internal auditor is appointed by the management of the company while the statuary auditor is appointed by the members of company or board of directors. The work of statuary audit is to check the authenticity of accounts and conduct the audit for the compliance purposes.
What is the audit compliance for companies?
Every private limited company is mandatorily required to fulfill the compliances requirement for his company in order to be compliant with the relevant rules and regulations. There are in total 2 auditing related forms that are required to be filed by the company after the PRIVATE LIMITED COMPANY incorporation. The form AOC 4 in which the company is required to file its audited financial accounts along with the necessary documents and details. Also, the form MGT 7 for filing the annual returns of the company must be filed prior to the due date. All the financial accounts of the company must be submitted after the proper audit has been conducted in respect of them.
In this manner the audit plays an imperative role in the in the annual compliances of the company.