Audit Requirements After Company Formation

Introduction

After a company is formed and begins its operations, it must comply with several regulatory requirements under Indian corporate law. One of the most important of these is the statutory audit, which ensures that the company’s financial statements present a true and fair view of its financial position. Conducted under the provisions of the Companies Act, 2013, the audit is mandatory for all companies, regardless of size or turnover. This article explains the audit requirements that arise after a company’s incorporation in India.

Appointment of First Auditor

As per Section 139(1) of the Companies Act, 2013, every company, other than a government company, must appoint its first statutory auditor within 30 days from the date of incorporation. This appointment is made by the Board of Directors. If the Board fails to appoint within this period, the appointment must be made by the members in an extraordinary general meeting within 90 days. The auditor holds office until the conclusion of the first Annual General Meeting.

Mandatory Statutory Audit

Every company, irrespective of its turnover, capital, or nature of business, is required to get its accounts audited by a Chartered Accountant. The statutory audit is conducted annually and examines the books of accounts, financial statements, vouchers, and supporting documents. The auditor issues an audit report which must be filed with the Registrar of Companies (ROC) along with the financial statements.

Audit of Books of Accounts

Under Section 128, every company must maintain proper books of accounts at its registered office or another notified location. These must be prepared using the accrual basis and double entry system. The auditor checks the accuracy of these records to assess whether the financial results are presented fairly.

Filing of Audited Financial Statements

As part of the annual compliance, companies must file:

• Form AOC-4: Containing the financial statements, including the audit report
  
• Form MGT-7: Annual return including shareholder and director details
  These forms must be filed with the ROC within 30 days and 60 days respectively from the date of the Annual General Meeting.
  

Auditor’s Report and Opinion

The statutory auditor issues an audit report expressing their opinion on the financial health and accuracy of the financial statements. It includes:

• Verification of assets and liabilities
  
• Review of profit and loss accounts
  
• Identification of non-compliance or fraud, if any
  This report must be annexed to the balance sheet and presented to shareholders.
  

Rotation and Tenure of Auditors

For certain classes of companies, such as listed companies and companies with paid-up capital of ₹10 crore or more, the law mandates auditor rotation every five years and restricts reappointment beyond two terms. This promotes independence and prevents long-term bias or conflict of interest.

Internal Audit Requirements

Some companies are also required to conduct internal audits under Section 138 of the Companies Act. Internal audits are compulsory for:

• Private companies with turnover exceeding ₹200 crore or outstanding loans exceeding ₹100 crore
  
• Public companies meeting certain thresholds
  This audit focuses on internal controls, risk management, and operational efficiency.
  

Tax Audit and Other Sectoral Audits

In addition to statutory audits, companies may be required to undergo:

• Tax audit under Section 44AB of the Income Tax Act, if turnover exceeds ₹1 crore
  
• GST audit if registered under GST laws (subject to turnover limits)
  
• Sector-specific audits for companies in banking, insurance, or NBFC sectors
  

These audits ensure compliance with tax and sectoral regulations.

Conclusion

Audit requirements are a vital part of a company’s post-incorporation obligations. They promote transparency, financial discipline, and legal compliance. By appointing a qualified auditor, maintaining accurate records, and meeting statutory deadlines, companies can build credibility with regulators, investors, and stakeholders. Fulfilling audit requirements is not only a legal necessity but also a sound practice for sustainable and ethical business management.

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