Private limited companies that have just been registered are subject to particular compliance requirements under the Corporations Act, 2013 (the “Act”). Among these standards that all businesses, no matter their size or nature, must fulfill is an audit.
The process of verifying the accuracy of a business’s books of accounts is called an audit. The company has to appoint an auditor to conduct the audit. The primary objective of an audit of the financial statements of the company is to provide the auditor with a platform to express their viewpoints.
Numerous invoices, vouchers, and books of accounts will need to be verified by the auditor to ensure accuracy and timeliness. A private limited business must get an annual audit conducted from company registration consultants in Pune to verify conformity with the Act and the Business Law Rules.
What are the 3 Main Types of Audits?
A private limited firm may undergo several audits for various reasons. Private company audits can take the following forms:
Statutory Audit
Regardless of its profit or turnover, every private limited business is required to undergo a statutory audit. A statutory audit is also required of a corporation that suffers a loss. According to the Act and Companies (Accounts) Regulations of 2014, every private limited company must fully have its annual accounts audited each financial year.
After reviewing the data in the books of accounts, bank balance, and financial statements, the statutory audit’s goal is to ascertain if a firm is accurately portraying its financial status.
Internal Audit
On the proposal of the internal management, the private limited company’s internal audit is carried out. The designated enterprises are required by the Act and the Companies (Accounts) Regulations of 2014 to engage an internal auditor to perform an audit of their business operations. The following limited private companies must carry out internal audits:
- Private businesses with sales from the previous fiscal year of at least Rs. 200 crore
- Private businesses that owe banks or other public financial institutions at least Rs. 100 crore
- Internal audits are conducted in order to assess the company’s operational effectiveness and financial soundness. They assist internal management in doing financial analysis and implementing the necessary adjustments to improve the effectiveness of its operations.
Cost Audit
The following private limited firms are required to conduct cost audits under the firms (Cost Records and Audit) Regulations, 2014:
- Companies that are private limited partnerships and that manufacture the products or offer the services specified in Table 3(A) of the Companies (Cost Records and Audit) Regulations
- At least Rs. 50 crore was made from all of its services and goods in the most recent fiscal year, with at least Rs. 25 crore coming from a single service or product.
- Companies that are private limited partnerships and that manufacture the products or offer the services specified in Table 3(B) of the Companies (Cost Records and Audit) Regulations
- In the preceding fiscal year, the company generated at least Rs. 100 crore annually from all of its services and items.
- Required total revenue of Rs. 35 crore for the specific commodity or service.
What Role Does the Auditor of a Limited Business Play?
The auditor’s job is to provide an unbiased assessment of a company’s financial performance and capacity to achieve its financial objectives. In most cases, managers and auditors collaborate to complete audits.
The Auditors’ Role
The two primary types of audits are internal and external. Personnel from the company conduct internal audits to make sure that corporate policies are followed. Independent auditors with no affiliation to the business are known as external auditors.
The following tasks are legally required of external auditors:
- The auditor’s responsibility includes evaluating the limited company’s requests as well as the general compliance with the law. This means looking at the firm’s finances, yearly reports, financial statements, and everything else related to it in order to ensure legal compliance.
- In addition, they ensure that the limited company pays all of its debts and liabilities. This means evaluating the contracts and agreements that the business has.
- They must be unbiased in order to audit the company’s financial records. There is no influence from the filmmakers on them.
- They must maintain objectivity and base their decisions on the information provided by the directors.
- They are responsible for ensuring that the company’s accounting records adhere to both worldwide accounting standards and the Companies Act.
- Investors should confirm whether the company’s financial records appropriately represent the business to make sure they are not being misled.
- They should confirm that there are no serious mistakes in the records.
The auditors who have been appointed must also meet the requirements in order to review the financial records of the organization. It is imperative for the directors to ensure that they have sufficient access to data and documentation.
Ensuring Compliance and Financial Transparency with Expert Auditing
Auditing is a critical process for every private limited company, regardless of size or profit. It ensures financial transparency, compliance with the Companies Act, and maintains the trust of stakeholders and investors. Whether it’s a statutory audit, internal audit, or cost audit, having a clear and accurate picture of a company’s financial health is essential for long-term success.
At Sachin Gujar & Associates, we understand the intricacies involved in auditing and compliance. As a leading firm for company registration in Pune with trusted company registration consultants in Pune, we offer comprehensive services that cover all aspects of auditing and business compliance. From helping private limited companies with their registration process to ensuring their financial records are in line with regulatory requirements, we offer reliable solutions tailored to your needs.
In addition to our expertise in auditing, we also specialize in being an expert NRI tax consultant in Pune. Whether you are an NRI seeking to understand your tax liabilities or looking for guidance on financial matters in India, our team of seasoned professionals is here to help. At Sachin Gujar & Associates, we strive to offer clarity, transparency, and personalized consultation, ensuring that your business stays compliant and financially sound.
For all your auditing, registration, and tax consultation needs, including NRI tax consultant Pune, trust our experienced team to guide you through every step with precision and care.