Introduction
Audit requirements for Indian subsidiaries are designed to ensure transparency, compliance, and financial accountability under Indian corporate law. Whether the subsidiary is wholly-owned or partially-owned by an Indian or foreign parent, it is treated as a separate legal entity and must comply with audit norms under the Companies Act, 2013, the Income Tax Act, 1961, and other applicable regulations. Audits provide credibility to financial statements and are essential for both internal management and external stakeholders.

Statutory Audit under Companies Act, 2013
Every Indian subsidiary, regardless of its turnover or profit, is required to conduct a statutory audit by a qualified Chartered Accountant. This audit ensures that the financial statements represent a true and fair view of the company’s affairs and comply with accounting standards notified by the Ministry of Corporate Affairs.

Appointment of Statutory Auditor
A statutory auditor must be appointed within 30 days of the company’s incorporation by the Board of Directors. If the board fails to do so, the shareholders must appoint the auditor at the first Annual General Meeting (AGM). The tenure of a statutory auditor is usually five years, subject to ratification.

Tax Audit under Income Tax Act, 1961
If an Indian subsidiary’s turnover exceeds ₹1 crore for business or ₹50 lakh for a profession in a financial year, a tax audit under Section 44AB becomes mandatory. The audit must be conducted by a Chartered Accountant, and the audit report is submitted electronically using Form 3CA/3CB and Form 3CD.

Internal Audit Requirements
Certain classes of subsidiaries, especially those meeting specified turnover or paid-up capital thresholds, are required to conduct internal audits. These audits are intended to assess risk management, internal control systems, and operational efficiency. Internal auditors may be employees or external professionals.

Secretarial Audit for Larger Subsidiaries
If the subsidiary is a public company with paid-up capital of ₹50 crore or more or a turnover of ₹250 crore or more, it must undergo a secretarial audit under Section 204 of the Companies Act. The audit must be conducted by a practicing Company Secretary to evaluate compliance with legal and procedural requirements.

Consolidated Financial Audits
Indian subsidiaries that are part of a larger group must submit their standalone audited financials for consolidation by the parent company. This is applicable to both Indian and foreign parents and ensures accurate group-level financial reporting.

Audit of Foreign-Owned Subsidiaries
Foreign-owned Indian subsidiaries are subject to all statutory audit requirements like domestic companies. Additionally, transactions with parent entities must comply with transfer pricing laws and may require separate audit documentation and reporting through Form 3CEB.

Cost Audit in Specified Industries
Subsidiaries engaged in specified industries such as manufacturing, telecommunication, or power, with certain turnover thresholds, must conduct cost audits under the Companies (Cost Records and Audit) Rules, 2014. This ensures proper maintenance of cost records and reporting of cost data.

Audit Report Filing Requirements
The audit report and financial statements must be filed with the Registrar of Companies using e-forms AOC-4 (financials) and MGT-7 (annual return). For companies under tax audit, the report must also be filed with the Income Tax Department by the specified due dates.

Penalty for Non-Compliance
Failure to comply with audit requirements can attract penalties on the company and responsible officers. This includes monetary fines, disqualification of directors, and reputational risk. Timely audits and accurate reporting are essential for maintaining legal standing and trustworthiness.

Conclusion
Audit requirements for Indian subsidiaries are comprehensive and non-negotiable. From statutory and tax audits to internal and secretarial reviews, these processes ensure legal compliance, financial accuracy, and governance integrity. Companies must engage qualified professionals, maintain proper records, and adhere to deadlines to meet audit obligations successfully.

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