According to the Companies Act 2013 and the Income tax Act every company in India registered as the private limited company is required to undergo the audits. The Companies are required to prepare the books of accounts and get them audited by the practising Chartered accountant in practice every financial year. Once the report are prepared and audited the same is required to be filed with the registrar of companies within the due time. It is done in order to ensure that the company is not acting in any faulty manner. Through the course of this blog we will be taking a look at the various aspects related to the auditing provisions for private limited company.
Prior to moving forward with understanding more about the audit for the private limited company it is important for us to know that how an auditor is appointed in the company.
How is auditor appointed?
The auditor of the company is required to be appointed by the board of the directors of the company in the first annual meeting within 30 days of the incorporation of the company. In case the board of directors are unable to do it then the members of the company must ensure to appoint the director within 900 days of incorporation at an annual general meeting. The auditor of the company once appointed is eligible to be appointed as the auditor for the period of 5 years.
What are the kinds of Audit?
Audit helps the company itself and the outside authorities to ascertain its financial position and look for any discrepancies. There are two kinds of audits for company based on their nature. Let us understand the different types of audit here –
Statuary Audit – Statuary Audit is a mandatory audit that is required to be conducted by the independent auditor as required by the government authorities. The audit is required to be performed by the external and independent auditor and shall be submitted to the specified authority. The private limited company is required to file the audit in the form specified by the ministry of corporate affairs. There are two kinds of statuary audit that needs to be undertaken by the private limited company as mentioned below-
Under the companies act 2013 every private limited company irrespective of the size and nature is required to undergo the company audit. The mandatory audit is required to be done by either the internal independent auditor or the external auditor through the various books of accounts of the company. Further, the audit report prepared is required to be submitted to the Registrar of Companies in every financial year by the due date.
Every private limited company is required to undergo a tax audit also irrespective of its turnover. The audit is required to be performed by an independent auditor in order to assure that the companies account are fair and disclose the correct financial position of the company. He tax audit is mainly concerned with the taxation aspects of the company.
Internal Audit – Unlike the statuary audit the internal audit is not mandatory in nature. This audit is conducted by the internal management for the company when they desire to take the review of the financial position of the company. This type of audit can also be performed to improve the operational efficiency of the company. The auditor for the internal audit of the company can be a internal or external auditor.
To state in simple words we can just say that audit of the private limited company is an annual compliance that is required to be filed by every company in a financial year. Failing to file the annual compliances on time can result in levy of hefty penalties thus it is important to abide the rules and regulations and do the proper filing.