Did you know a private limited company audit is done by external auditors to understand a firm’s operations, transactions, and economic records? This is true. Conducting it instils trust and boosts transparency among shareholders regarding a firm’s dependability and accuracy of financial statements.
Auditing is mandatory for every private limited business regardless of its nature or turnover. To learn more about it and its requirements, this blog post will be your informed guide.
A private limited company offers the benefits of both company flexibility and limited liability. Dissimilar to a public firm, this business entity has restrictions regarding the transferability of shares as it cannot be listed on stock exchanges. This is why it must adhere to legal compliance and undergo annual audits.
Not to forget, the compliance process cannot be done without the presence of a certified auditor. The hired auditor will analyse your firm’s accounting statements and produce the audit report. Then, the audited financial statements will be filed with the respective area’s Registrar of Companies (ROC).
Different purposes call for conducting different audits within a company. They are as follows:
Every private limited company, whether experiencing profit or loss, has to conduct a statutory audit annually. This audit ensures that a firm provides an exact representation of its financial situation after its accounting statements are examined.
Based on the suggestions of a private limited company’s internal management team, an internal audit is conducted.
It is integral for prescribed firms to select an internal auditor. They will audit the firm’s activities and functions to evaluate their economic status and operational efficiency. Usually, internal audits are performed by the following private limited companies:
Following the Companies Rules, 2014, cost audit is performed by companies like:
Firms employed in goods production or offering services documented in Table 3(A) of the Companies (Cost Records and Audit) Rules and having:
Firms employed in goods production or offering services listed in Table 3(B) of the Companies (Cost Records and Audit) Rules and having:
Within thirty days from the date of its registration, a private limited company must appoint its first statutory auditor. The hired first auditor can be an independent practising CA, LLP or a CA firm. They will hold the auditor’s office for five years.
However, the auditor’s appointment will only be approved at the firm’s first Annual General Meeting / AGM.
Since the business’ internal audit is conducted by its internal management team, the appointed auditor can be a firm employee with experience working as an auditor. They can also be a CA or professional.
A private limited company can only select a cost auditor within 180 days of the advent of the financial year. They can only be a cost accountant practising cost audits.
It is done before the firm’s AGM is conducted. The statutory auditor must present the firm’s audit report before the conduct of the board. Also, the report must be attached to the organisation’s financial statements and filed with the ROC.
The due dates of a statutory audit include:
There is no due date for the internal audit. Thus, before the conduct of the AGM, the internal auditor must submit a report to the board.
In the form CRA-3, the cost audit report must be submitted to the board within 30 September every year. The board will examine the cost report after receiving it.
In the form CRA-4, the board must present the cost audit report with suitable information to the Central Government within 30 days of obtaining the cost audit report.
In a private limited company, the audit requirements filed in ROC forms include:
Form AOC-4- Annual filing of company financial statements
Form MGT-7- Filing of firm annual return
Form ADT-1- Appointment of company auditor
Form CRA-3- Submission of cost audit records to the board
Form CRA-2- Appointment of cost auditor
Form CRA-4- Filing of a cost audit report
You Can Read Also: Challenges Encountered by Entities in the Private Limited Company Registration Process
For budding entrepreneurs, conducting a private limited company audit after company registration can be a complex process. But, following the above-mentioned guide can streamline it.
Remember, non-filing and non-submission of the forms and the different audits will also attract a penalty. As a private limited company, you must mandatorily conduct statutory, internal, and cost audits.
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