Audit of Private Limited Company
Audit of Private Limited Company
Congratulation You Registered your company. Now its time to update your self for Audit of Private Limited Company. Company Act 2013 made it mandatory for Audit of company irrespective of its turnover or nature of company. All Private Limited company required to maintain there books of accounts. Its company directors responsibility to get its books of accounts audited. Company need to appoint practicing Charted accountant for auditing.
Company Audit is inspection of business that is carried out to ensure that they are correct. The object of an audit financial statement it to enable auditor to express an opinion. The auditor will have to go through various books of accounts , bills , vouchers to satisfy that accuracy of it.
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Types of Audit of Private Limited Company
1. Internal Audit
Applicability of Internal audit: In case of private company having
- Turnover of Rs 200cr or more during preceding financial year or
- Outstanding loans or borrowing from Banks, Public financial institutions exceeding Rs 100cr or more at any time during preceding financial year needs to appoint an internal auditor to conduct internal audit of books of accounts of private limited
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2. Statutory Audit
Applicability of statutory audit is mandatory irrespective of Turnover, profit, etc. Company incurring loss is also required to conduct statutory audit compulsorily.
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3. Cost Audit
For companies under item A: Every company having annual turnover from all its products and services in the immediately preceding financial year of Rs. 50 crore or more and the aggregate turnover of the individual product or products or service or services of Rs. 25 crore or more.
For companies under item B: Every company having annual turnover from all its products and services in the immediately preceding financial year of Rs. 100 crore or more and the aggregate turnover of the individual product or products or service or services of Rs. 35 crore or more.
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4.Company Audit Under Income Tax Act 1961
Tax audit is mandatory under section 44AB of Income tax act, 1961 to following person:
1. Person carrying business: Total sales, Turnover or gross receipts exceeds Rs. 1 crore.
2. Person carrying profession: Turnover or gross receipts exceeds Rs. 50 lakhs.
3. Businesses whose annual gross turnover/ receipt does not exceeds Rs. 2 crore are covered under section 44AD of Presumptive Taxation Scheme.
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5. Audit Under GST Act 2017
1.Turnover based audit takes place when turnover exceeds Rs. 2 Crore.General audit takes place when the order is passed by the GST commissioner.
2.Special audit takes place when the order is passed by the deputy or assistant commissioner by taking approval of GST commissioner.
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Who Can Do Company Audit?
Company audit shall be done by the auditor appointed by the company. Auditor shall be appointed within 30days of company incorporation. Auditor of the company shall be appointed by passing board resolution at board meeting. If board fails to appoint, members shall appoint first auditor within 90days by extraordinary general meeting. He shall hold position of auditor from one Annual general meeting to the conclusion of the next Annual general meeting. He is appointed by filing e-form ADT-1.
Auditors of the company shall be appointed at first Annual general meeting for maximum 5 years tenure (i.e. from 1st AGM to conclusion of 6th AGM) subject to ratification at every Annual general meeting.
A person who is a Chartered Accountant within the meaning of Chartered Accountant Act, 1949 can only be appointed as an auditor. A firm of Chartered Accountants can be appointed as auditor only if its majority of partners. LLP of chartered accountants can be appointed as auditor of company.
- Re-appointment of auditor is applicable in case of private company as per section 139(9) and (10).
- Rotation of Auditor is applicable in case of Private companies having paid up share capital of Rs. 20 crores or more. [section 139]
- Casual vacancy of auditor is filled by board of directors within 30days. [section 139(8)]
- Resignation of auditor is applicable in case of private companies. Auditor who has resigned from the company shall file the statement in e-form ADT-3 to company as well as Registrar within 30days of resignation. [section 140]
- Auditor can be removed before expiry of his term by passing special resolution and with the prior approval of central government. Application is made to central government in e-form ADT-2 within 30days of passing board resolution. [section 140]
- Remuneration of auditor is fixed se per section 142 of companies act, 2013.
- Statutory auditor cannot act as internal auditor.
- Internal auditor may or may not be employee of the company.
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Company Audit Compliance Check List
1.ROC Compliances, Income tax and GST rules are necessary to know the default status of the company.
2.Form ADT-1 for appointment of auditor.
3.Form ADT-2 for removal of auditor.
4.Form ADT-3 for resignation of auditor.
5.Form AOC-4 for annual filing of financial statements (Notice, Balance sheet, Profit and loss account, Notes to accounts, Directors report, Auditors report, accounting standards)
6.Form MGT-7 for filing of Annual return with shareholders and debentures list)
7.Form MGT-14 for filing of resolution and agreement to ROC.
8.Form CRA-1 for maintaining cost records.
9.Form CRA-2 for appointment of cost auditor.
10.Form CRA-3 for submitting cost audit records to board.
11.Form CRA-4 for filing cost audit report, wherever applicable.
12.Form ITR-6 for filing Income tax return of company.
13.Cross verification of GSTR-3B with GSTR-1 and GSTR-2A
14.Input tax credit
15.Form GSTR 9C for filing of GST Audit form
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Who Needs To Sign Company Audit Report?
Two directors of the company shall sign the financial statement of the company one of whom shall be the Managing director and if there is no managing director then the director can sign the financial statement. After signing the financial statement by the directors, Auditor’s Audit report is duly stamped and signed by the auditor appointed by the company. Audit report shall be a true certified copy. The qualifications, observations or comments on Financial statement, which have adverse effect as mentioned in Audit report shall be read before the general meeting and open to inspection by any member of company. Auditor is required to report fraud against company by officers or employees if he has reason to believe that an offense involving fraud is committed while conducting audit or while having access to books of accounts. [Section 145]
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Due Date Of Private Limited Company Audit
- Internal Audit: There is no due date for internal audit. Internal auditor is required to report to the board before Annual general meeting.
- Statutory Audit: Statutory audit is to be conducted before Annual general meeting and the audit report is to be submitted to the board. Audit report shall be read before the general meeting. Audit report shall be attached to the financial statement of the company while filing financial statement in e-form AOC-4 within 30 days of Annual general meeting. E-form MGT-7 is the form which is required to file Annual return within 60 days from the date of Annual general meeting. The due date for conducting Annual general meeting is on or before 30th September following the end of a financial year.
- Cost Audit: Cost audit report is required to be submitted to the board and after receiving the report company shall furnish full information to central government within 30 days of receipt of cost audit report.
- Tax Audit: The due date for filing income tax return after conducting tax audit is 30th September.
- GST Audit: The due date is 31st December of next financial year.
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Penalty For Private Limited Company Audit
Penalty for Form AOC-4: A penalty of Rs 100/- per day on delay in filing Form AOC. Apart from that, the penalty of Rs. 1000/- per day of default is charged from the company which can go maximum up to Rs. 100000/-.
Penalty for Form MGT-7: A penalty of Rs 100/- per day is charged by the companies. Each member of the company and who is in default shall be deemed for paying the penalty of Rs. 50000/- and also the late fee of Rs. 100/- per day if the default continues. The Penalty is subject to a maximum of Rs. 500000/-.
Penalty for non- filing of ITR-6: Late filing fees will be applicable up to Rs. 10000/- for non-filing of Income tax return. As per section 273B, a lump sum fine of Rs. 150000/- or 0.5% of total sales, turnover or gross receipts for the current financial year.
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Private Limited Company Audit Report
Notice, Director’s report, form MGT-9 are attached before Auditors report. Auditors report is attached below the form MGT-9 containing the contents with the information gained after conducting company audit. Annexure to the audit report is given in Form 3CD. Balance Sheet, Profit and loss account statement, notes to accounts are Attached. If tax audit is conducted ‘Tax Audit” observations are also attached. Notes forming part of financial statements are also attached at the end of the Audit Report.
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Contents contained in the Auditor’s report
| S.No | Heading |
| 1 | Title |
| 2 | Opinion |
| 3 | Basis for opinion |
| 4 | Key audit matters |
| 5 | Information other than financial statements and auditors report thereon |
| 6 | Managements responsibility for the financial statements |
| 7 | Auditor’s responsibility for the audit of the financial statement |
| 8 | Other reporting responsibility |
| 9 | Signature of the Auditor |
| 10 | Place of signature and date of audit report |
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Annexure to the Audit Report is given in FORM 3CD
| S.No | Annexure |
| 1 | Loans and advances |
| 2 | Cash and bank balance |
| 3 | Payment vouchers |
| 4 | Inventories |
| 5 | Fixed assets |
| 6 | Sales tax, GST and other compliances of law |
| 7 | Receivables and payables |
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Notes forming part of financial statements
| S.No | Significant Accounting Policies |
| 1 | Basis of accounting and preparation of financial statement |
| 2 | Use of estimates |
| 3 | Inventories |
| 4 | Cash and cash equivalents |
| 5 | Cash flow statement |
| 6 | Depreciation and amortization |
| 7 | Revenue recognition |
| 8 | Income taxes |
| 9 | Tangible fixed assets |
| 10 | Foreign currency transaction |
| 11 | Government grants, subsidies and export |
| 12 | Investments |
| 13 | Employee benefits |
| 14 | Borrowing cost |
| 15 | Earnings per share |
| 16 | Current assets, loans and advances |
