Audit
An audit checks that an organisation’s accounts give a fair and accurate picture, and that the systems behind them work.
Statutory audit
An independent examination of an organisation’s financial statements, ending in an auditor’s report on whether they give a true and fair view. We check whether the organisation has the systems and processes in place to give a fair and accurate picture of its financial position, with cross-checking of the records behind the numbers.
What it covers
- Bank balances and reconciliations
- Books of account
- Financial transactions, vouched against bills and invoices
- The systems and processes that produce the numbers
Who needs it
- Every company registered under the Companies Act, 2013, every year, whatever its size
- LLPs with turnover above ₹40 lakh or contribution above ₹25 lakh
- Banks, and trusts and societies whose rules or funders require it
What to keep ready
- Books of account (the data from your accounting software)
- Bank statements for the full year
- Sales and purchase invoices
- GST and TDS returns filed during the year
- Last year’s audited accounts
Internal audit
Independent, objective assurance and consulting to improve how an organisation runs. Internal audit brings a systematic, disciplined approach to evaluating and improving risk management, controls and governance. It runs through the year and reports to management or the board, so problems are found while they can still be fixed.
What it covers
- Purchases and payments
- Sales and collections
- Inventory and fixed assets
- Payroll
- Cash and bank
- Statutory compliance: GST, TDS, PF and ESI
Who needs it
- Listed companies (required by the Companies Act, 2013)
- Unlisted public companies with paid-up capital of ₹50 crore or more, turnover of ₹200 crore or more, borrowings of ₹100 crore or more, or deposits of ₹25 crore or more
- Private companies with turnover of ₹200 crore or more, or borrowings of ₹100 crore or more
- Any business that wants stronger controls, even when it isn’t required
What to keep ready
- Your process notes or standard operating procedures, if any
- Access to the accounting system
- Last internal or statutory audit report
Statutory audit and internal audit, side by side
| Question | Statutory audit | Internal audit |
|---|---|---|
| Appointed by | Shareholders, at the annual general meeting | Management or the board |
| Looks at | Whether the financial statements are true and fair | Processes, risks and controls |
| When | Once a year, after the year ends | Through the year |
| Reports to | Members | Management, the board or the audit committee |