Audit Requirements of a Private Limited Company: Types & Importance

Audits play a crucial role in ensuring compliance for Private Limited Companies in India. Private limited company audits ensure transparency, financial accuracy, and adherence to the Companies Act, 2013. Even newly incorporated or small Private Limited Companies must comply with audit requirements from their first financial year. This is because statutory audits are mandatory regardless of turnover or profit.

In this blog, you’ll learn everything about audit requirements for a Private Limited Company, including the types of audits, eligibility, and applicability. The blog will also cover key deadlines and forms, and the consequences of non-compliance. Whether you’re a startup or an established business, understanding these essentials helps you stay compliant and build financial credibility.

What is an Audit and Why Does It Matter for a Private Company?

An audit is an independent examination of a company’s financial statements, books of accounts, and internal controls to verify accuracy and compliance with legal requirements. Under the Companies Act, 2013, every Private Limited Company must conduct an annual audit of its accounts, regardless of turnover or profit.

Why an Audit Matters:

• Ensures Legal Compliance: Fulfills mandatory provisions under the Companies Act, 2013, and Income Tax Act.
• Builds Financial Credibility: Strengthens confidence among investors, shareholders, and financial institutions.
• Enhances Transparency: Provides a true and fair view of the company’s financial position.
• Improves Internal Controls: Identifies errors, inefficiencies, or potential fraud.
• Avoids Penalties: Prevents fines, legal action, or director disqualification due to audit non-compliance.

An audit plays a vital role in maintaining the financial health and credibility of a business. After Pvt Ltd company registration, conducting regular audits ensures that the company operates within legal boundaries and maintains investor confidence.

Types of Audits Applicable to a Private Limited Company

Every Private Limited Company in India is subject to one or more types of audits, depending on its size, operations, and regulatory scope. Below are the major types of audits applicable to Private Limited Companies in India:

1. Statutory Audit

Sections 139 and 143 of the Companies Act, 2013, make it mandatory for all Private Limited Companies to conduct a Statutory Audit, regardless of turnover or profit. It ensures the company’s financial statements give a true and fair view and comply with legal and accounting standards.

2. Internal Audit 

As per Rule 13 of the Companies (Accounts) Rules, 2014, internal audits apply to companies with a turnover of ₹200 crore or more, or borrowings of ₹100 crore or above. It checks internal processes, controls, and risk management for better operational efficiency.

3. Cost Audit

Companies in the manufacturing or service sectors listed under the Cost Records and Audit Rules must conduct a cost audit. It applies when total turnover exceeds ₹50 crore and product or service turnover crosses ₹25 crore, ensuring transparency in cost structures. Section 148 of the Companies Act, 2013, requires companies engaged in regulated sectors such as manufacturing, power, telecom, or pharma to maintain cost records.

4. Tax Audit 

Section 44B of the Income Tax Act, 1961, requires a tax audit if turnover exceeds ₹1 crore (or ₹10 crore if at least 95% of receipts and payments are digital). It verifies accuracy in income reporting, deductions, and tax compliance.

5. Other Audits

Certain companies may also require specialized audits based on their structure and turnover. Secretarial Audits are mandatory only for listed companies, their subsidiaries, or private limited companies that meet specific thresholds under the Companies Act.

Although the mandatory GST Audit requirement was removed from FY 2020–21 onwards, businesses with a turnover exceeding ₹5 crore must still furnish GSTR-9C reconciliation statements to verify the accuracy of their tax filings. 

Auditor Appointment in a Private Limited Company: Process and Timeline

Every Private Limited Company must appoint a Statutory Auditor to review its financial statements as per the Companies Act, 2013. The authorities clearly define the process, eligibility, and timeline to maintain transparency and compliance.

Who Can Be Appointed

Only a Chartered Accountant (CA) or a CA firm with a valid certificate of practice can serve as the company’s auditor. The auditor must be independent, not a director, employee, or person with a financial interest in the company.

When to Appoint

Here’s when to appoint an auditor:

• The Board of Directors must appoint the first auditor within 30 days of incorporation.
• If not done, shareholders must appoint one within 90 days at an Extraordinary General Meeting (EGM).
• Shareholders then appoint subsequent auditors at each Annual General Meeting (AGM) for a five-year term.

How the Appointment Happens

Follow this process to appoint an auditor:

• The Board proposes the auditor’s name through a resolution.
• The auditor gives written consent and eligibility confirmation under Section 141.
• The company must file Form ADT-1 with the Registrar of Companies (ROC) within 15 days of appointment.

Timely auditor appointment not only ensures compliance but also enhances investor confidence and protects the company from future regulatory issues.

How Does the Audit Process Work for a Private Limited Company?

The audit process follows a defined sequence to ensure accuracy, transparency, and legal compliance under the Companies Act, 2013.

• Auditor Appointment: The Board or shareholders appoint a Chartered Accountant or audit firm, and the company files the appointment with the ROC using Form ADT-1 within 15 days.
• Audit Planning: The auditor reviews the company’s structure, internal systems, and financial records to identify key risk areas and determine the audit scope.
• Data Collection: The company provides all necessary documents, such as ledgers, invoices, bank statements, and compliance reports, for examination.
• Audit Review: The auditor verifies financial transactions, checks internal controls, and ensures that records are complete and accurate.
• Audit Report Preparation: After reviewing the accounts, the auditor issues a report confirming whether the financial statements present a true and fair view of the company’s financial position.
• Post-Audit Filings: The company files the audited financial statements and audit report with the Registrar of Companies (ROC) and includes them in its annual compliance submissions.

Managing audits and filings can be complex, from coordinating with auditors to meeting strict ROC deadlines. RegisterKaro helps you handle it all seamlessly. Get expert assistance for audit reports, ROC forms, and annual compliance, so your company remains 100% compliant and stress-free.

Audit Deadlines and ROC Filing Compliance for Private Limited Companies

Every Private Limited Company must comply with audit and filing deadlines on time to avoid penalties and maintain good legal standing. Here are the key timelines and requirements:

• Annual Audit Completion: Every Pvt Ltd company must complete its statutory audit at the end of each financial year, by 30th September (for companies following April–March FY).
• Board Approval of Financial Statements: The company’s Board of Directors must approve the audited financial statements before filing them with the ROC.
• AGM: The Annual General Meeting (AGM) must be held within six months from the end of the financial year (usually by 30th September) to adopt the audited accounts and appoint/reappoint auditors. Companies incorporated between January and March can hold their first AGM within 9 months of the end of the financial year.
• Income Tax Audit (if applicable): Companies covered under Section 44AB of the Income Tax Act must file the tax audit report (Form 3CA/3CB & 3CD) by 30th September each year.
• ROC Filings
  • Form AOC-4: Filed within 30 days of the AGM to submit audited financial statements.
  • Form MGT-7: Filed within 60 days of the AGM to submit the annual return.
  • Form ADT-1: Filed within 15 days of auditor appointment or reappointment.

Adhering to these audit and filing timelines ensures full compliance with the Companies Act, 2013, prevents late fees, and keeps the company’s legal status active and reliable.

Essential Forms and Documents Required for Company Audit and Compliance

A Private Limited Company must maintain and submit specific forms and documents during its audit and annual filing process. Having these ready ensures smooth compliance with the Companies Act, 2013, and related regulations.

Key ROC Forms

Major ROC forms needed for audit are:

• Form ADT-1: For auditor appointment or reappointment, to be filed within 15 days of the AGM or Board resolution.
• Form AOC-4: For submitting audited financial statements, directors’ report, and auditor’s report within 30 days of the AGM.
• Form MGT-7 / MGT-7A: For filing the annual return, to be submitted within 60 days of the AGM.
• Form 3CA / 3CB & 3CD: For filing the tax audit report under Section 44AB of the Income Tax Act (if applicable).

Documents Required for Audit

Some documents required for the audit are:

• Books of accounts and ledgers (sales, purchases, cash, journal, bank, etc.)
• Balance sheet, profit & loss account, and trial balance
• Bank statements and reconciliations
• Invoices, vouchers, and expense records
• Form DIR-12, in case of auditor resignation or a change in auditor
• Digital Signature Certificate (DSC) of directors and authorized signatories for filing audit-related forms with the ROC
• Director’s Report, summarizing the company’s financial performance and compliance status for the financial year
• Details of loans, advances, and investments
• Statutory registers and minutes of meetings
• The previous year’s audit report and supporting schedules

Proper maintenance of these records ensures timely filings, error-free audits, and continued legal compliance for every Private Limited Company.

Penalties and Consequences of Non-Compliance with Audit Requirements

Ignoring audit and filing rules can lead to heavy fines, legal action, and loss of credibility. The Companies Act, 2013, enforces strict penalties for delays or non-compliance.

• Failure to Conduct Statutory Audit: If the company doesn’t appoint an auditor or conduct an annual audit, penalties can reach ₹5 lakh for the company and ₹1 lakh for officers, plus daily fines.
• Non-Filing of Financial Statements (Form AOC-4): Late filing attracts a ₹100 per day fine with no maximum limit. Continuous default can lead to the prosecution of company officers.
• Non-Filing of Annual Return (Form MGT-7):  Failure to file within 60 days of the AGM incurs a ₹100 per day penalty and may mark the company as inactive.
• Auditor Appointment Default (Form ADT-1): Not filing or appointing an auditor properly can trigger ROC action and director disqualification.

Repeated non-compliance harms credibility, restricts bank or tender eligibility, and may even result in the company being struck off the MCA register.

Audits are not just a legal formality; in fact, they safeguard your company’s integrity. Every Private Limited Company must conduct a statutory audit, regardless of turnover or profit. It builds investor confidence, ensures compliance, and strengthens financial discipline. By meeting audit deadlines, filing required forms, and maintaining accurate records, you protect your business from penalties and legal risks. Stay compliant, stay credible.

---

Frequently Asked Questions (FAQs)

Q. Is an audit required for a startup Private Limited Company with no business yet?

Yes. Every Private Limited Company must conduct a statutory audit under the Companies Act, 2013, even if it has no operations or revenue. The audit confirms that the books of accounts are properly maintained and ensures the company remains compliant from the first financial year.

Q. Can a company skip an audit if it has zero turnover?

No. Audit is mandatory for all Private Limited Companies regardless of turnover, profit, or business activity. The Companies Act, 2013, does not provide any exemption based on revenue. Even a dormant or inactive company must appoint an auditor and file audited financial statements.

Q. What is the difference between a statutory audit and a tax audit?

A statutory audit is mandated under the Companies Act, 2013, for all Private Limited Companies to ensure true and fair financial reporting. A tax audit, under Section 44AB of the Income Tax Act, applies only when a company’s turnover exceeds prescribed limits (₹1 crore or ₹10 crore for digital transactions).

Q. Who can be appointed as the company’s auditor?

Only a Chartered Accountant (CA) or a firm of CAs holding a valid certificate of practice can act as an auditor. The auditor must be independent — not a company director, employee, or anyone with a financial interest in the company. Their appointment must be filed with the ROC in Form ADT-1.

Q. How much does an audit usually cost for a Private Limited Company?

Audit fees vary depending on the company’s size, transactions, and record complexity. For small Private Limited Companies, it can range from ₹10,000 to ₹50,000 per year. For medium or large firms, the cost may exceed ₹1 lakh, especially if multiple audits (tax, cost, internal) apply.

Q. What happens if a company misses the AGM or files audit reports late?

Missing the AGM or filing financial statements after the due date attracts a ₹100 per day penalty. Prolonged delay may lead to ROC action, officer prosecution, or even director disqualification. Timely AGM and ROC filings ensure good standing and prevent compliance risks.

Q. When should the first auditor be appointed in a Private Limited Company?

The Board of Directors must appoint the first auditor within 30 days of incorporation. If not, shareholders must appoint one within 90 days at an Extraordinary General Meeting (EGM). The appointment must be reported to the Registrar of Companies using Form ADT-1 within 15 days.

Q. What is the rotation of auditors, and when does it apply?

Rotation of auditors means changing the audit firm or auditor after a fixed term to maintain independence. It applies mainly to listed and large companies, not typically to small Private Limited Companies. For private companies, it becomes applicable only if paid-up capital exceeds ₹50 crore.

Q. What are the key documents required for an audit?

Key documents required for an audit include: 

• Books of accounts
• Ledgers
• Balance sheet
• Profit and Loss Account
• Invoices
• Bank statements
• Board meeting minutes

Supporting schedules like prior audit reports, loan details, and investment records are also needed. Proper documentation ensures smooth and error-free audits.

Q. What are the penalties for not conducting an audit?

Failure to appoint an auditor or conduct a statutory audit can lead to penalties up to ₹5 lakh for the company and ₹1 lakh for officers, with additional daily fines. Continuous non-compliance may result in a director’s disqualification or the company being struck off by the ROC.