{"id":40982,"date":"2022-03-09T11:58:02","date_gmt":"2022-03-09T06:28:02","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=40982"},"modified":"2025-02-21T17:34:35","modified_gmt":"2025-02-21T12:04:35","slug":"audit-under-companies-act-2013","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/audit-under-companies-act-2013\/","title":{"rendered":"Audit under Companies Act, 2013: Explained"},"content":{"rendered":"\n<p class=\"has-drop-cap\">An audit is an independent form of examining any company&#8217;s financial position irrespective of its size and legal structure. The Audit is conducted to express an opinion thereon, which helps report and determine an accurate and fair view of a company&#8217;s financial position and operating result. The current write-up throws light on the audit under Companies Act, 2013.<\/p>\n\n\n\n<div class=\"mt-3 mb-3 embed-responsive embed-responsive-16by9\"><iframe class=\"embed-responsive-item\" src=\"https:\/\/www.youtube.com\/embed\/fGAhFYKFPow\" frameborder=\"0\" allow=\"accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen=\"\"><\/iframe><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/audit-under-companies-act-2013\/#Regulations_around_Audit_under_Companies_Act_2013\" >Regulations around Audit under Companies Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/audit-under-companies-act-2013\/#Appointments_of_Auditors_under_Companies_Act_2013\" >Appointments of Auditors under Companies Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/audit-under-companies-act-2013\/#Appointment_of_Subsequent_Auditor\" >Appointment of Subsequent Auditor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/audit-under-companies-act-2013\/#Persons_Not_eligible_for_an_Audit_under_Companies_Act_2013\" >Persons Not eligible for an Audit under Companies Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/audit-under-companies-act-2013\/#Types_of_Audits_under_Companies_Act_2013\" >Types of Audits under Companies Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/audit-under-companies-act-2013\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regulations_around_Audit_under_Companies_Act_2013\"><\/span>Regulations around Audit under Companies Act, 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As\nrequired for Audit under Companies Act, 2013, every company shall prepare a\nfinancial statement ending 31st March every year. Such financial statements\nmust be given an accurate and fair view of the company&#8217;s financial affairs and\ncomply with the accounting norms notified by the central government under\nSection 133 of the Companies Act. The company&#8217;s financial statement must also\nbe prepared in the form and format that may be laid down for a specific type of\ncompany.<\/p>\n\n\n\n<p>The\nexpression financial statement required for Audit under Companies Act, 2013\nshall include-<\/p>\n\n\n\n<ul>\n<li><strong><em>Profit &amp; loss account, or in the case\nof Non-profit organization, and income &amp; expenditure account Balance sheet <\/em><\/strong><em><\/em><\/li>\n\n\n\n<li><strong><em>Cash flow statement <\/em><\/strong><em><\/em><\/li>\n\n\n\n<li><strong><em>A statement for changes in shares, if\napplicable. &amp;<\/em><\/strong><em><\/em><\/li>\n\n\n\n<li><strong><em>An explanatory note attached to, or\nconstituting part of, any document referred<\/em><\/strong><em><\/em><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Appointments_of_Auditors_under_Companies_Act_2013\"><\/span>Appointments of Auditors under Companies Act, 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To\nconduct an audit under the Companies Act, 2013, the first auditor must be\nappointed by the BODs within 30 days from the company&#8217;s date of incorporation.\nHere, an auditor means a-<\/p>\n\n\n\n<ul>\n<li><strong><em>A Chartered accountant or <\/em><\/strong><strong><em><\/em><\/strong><\/li>\n\n\n\n<li><strong><em>A firm of chartered accountants, <\/em><\/strong><strong><em>who are qualified to be the company&#8217;s\nauditor and who have given his approval to be appointed as auditor of the\ncompany. <\/em><\/strong><\/li>\n<\/ul>\n\n\n\n<p>However,\nif the Board of Directors fails to appoint the first auditor o the company, the\nBoard shall intimate the company member who can appoint the first auditor\nwithin 90 days of such EGM.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Appointment_of_Subsequent_Auditor\"><\/span>Appointment of Subsequent Auditor<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In\nthe first Annual general meeting, the auditor needs to be appointed to hold\noffice for five years. However, the auditor&#8217;s appointment must be ratified in\nevery subsequent annual general meeting.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Persons_Not_eligible_for_an_Audit_under_Companies_Act_2013\"><\/span>Persons Not eligible for an Audit under Companies Act, 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Below\nmentioned individual shall be ineligible for appointment as an auditor of a\ncompany &#8211;<\/p>\n\n\n\n<ul>\n<li>A body corporate other than an <strong><a href=\"https:\/\/corpbiz.io\/llp-registration\" title=\"LLP Registration\">LLP registered<\/a><\/strong> under the Limited Liability Partnership Act, 2008. <\/li>\n\n\n\n<li>An employee or officer from the company.<\/li>\n\n\n\n<li>A person who is a partner or employed of an employee or director of the company.<\/li>\n\n\n\n<li>A person who is a family member or friend.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Audits_under_Companies_Act_2013\"><\/span>Types of Audits under Companies Act, 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As\nper the Companies Act,2013, an attempt has been made to cover each aspect of\ncorporate functioning under Audit by prescribing various types of audits- <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Internal Audit under Companies Act, 2013<\/h3>\n\n\n\n<p>Internal\nAudit is an independent service to examine a company&#8217;s internal controls,\nbusiness practices, processes, and methods. An internal audit helps ensure\ncompliance with the various laws applicable to a company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Secretarial Audit under Companies Act,2013<\/h3>\n\n\n\n<p>As per the Companies Act,2013, A <a href=\"https:\/\/corpbiz.io\/secretarial-audit\" title=\"Secretarial Audit\"><strong>Secretarial Audit<\/strong><\/a> is an audit to examine the compliances of various regulations and various other laws applicable to the companies. A Secretarial Audit is an audit where the auditor discloses an opinion as<\/p>\n\n\n\n<p><strong><em>To\nwhether persist relevant systems and processes in the company are in accordance\nwith the size and functioning of the company. Also, the auditor monitors and\nexamines compliance with applicable laws, rules, regulations, and guidelines. <\/em><\/strong><\/p>\n\n\n\n<p>As\nper <strong>Section 204<\/strong>, Companies Act, 2013 <strong>Read with rule 9<\/strong> of the\nCompanies (Appointment and Remuneration of Managerial Personnel) Rules, 2014\nrequires that-<\/p>\n\n\n\n<ul>\n<li>All\nListed Company,<\/li>\n\n\n\n<li>Public\nCompany having Paid-up capital of <strong>50 crores or more, or <\/strong>turnover of <strong>250\ncrores or more,<\/strong><\/li>\n\n\n\n<li>Any\nprivate company serving as a subsidiary of a public company that falls into the\ncategories mentioned above shall conduct a Secretarial Audit. <\/li>\n<\/ul>\n\n\n\n<p><strong>Note:\nA secretarial audit is obligatory if any of the above requirements are met.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Statutory Audit under the Companies Act,2013-<\/h3>\n\n\n\n<p>Section 143 of the <strong>Companies Act,2013<\/strong><sup><a href=\"https:\/\/www.mca.gov.in\/content\/mca\/global\/en\/acts-rules\/ebooks.html\"><strong>[1]<\/strong><\/a><\/sup> entails provisions regarding powers and duties of auditors. The statutory auditor shall present a report to the company&#8217;s shareholders on the Books of accounts and financial documents examined by him. <\/p>\n\n\n\n<p>A\nstatutory audit is an audit mandated by a Statute that ensures that the\naccurate and fair view of the book of accounts is presented to the Regulators\n&amp; the Public. Unlike internal Audits, Statutory Audits are not optional and\nmust be performed if a company satisfies specific criteria. <\/p>\n\n\n\n<p>The Statutory Auditor will have access to books of accounts and vouchers etc., constantly, and he has any authority to ask for further information from company officers, if necessary. The auditor in his report must clarify, besides other things, whether the <a href=\"https:\/\/corpbiz.io\/learning\/basic-financial-statements\/\"><strong>financial statements<\/strong><\/a> represent an accurate and fair picture of the company&#8217;s affairs as at the end of the financial year. <\/p>\n\n\n\n<p><strong>Note:<\/strong> In case of any qualifications in the audit\nreport, the reason must be stated in the report. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Branch Audit under Companies Act, 2013<\/h3>\n\n\n\n<p>Branch\noffice Accounts are audited by-<\/p>\n\n\n\n<p><strong>In\ncase of Local Branches-<\/strong><\/p>\n\n\n\n<ol>\n<li>Company&#8217;s Auditor<\/li>\n\n\n\n<li>Another Qualified Auditor<\/li>\n<\/ol>\n\n\n\n<p><strong>In\ncase of Foreign Branches-<\/strong><\/p>\n\n\n\n<ol>\n<li>Company&#8217;s Auditor<\/li>\n\n\n\n<li>Another Qualified Auditor<\/li>\n\n\n\n<li>An individual qualified to audit accounts according to the laws of that country.<\/li>\n<\/ol>\n\n\n\n<p>The\nBranch Auditor shall prepare a review report on the BOA of the branch examined\nby him and shall send the report to the company&#8217;s auditor.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Cost Audit under Companies Act, 2013<\/h3>\n\n\n\n<p>Cost\nAudit is the method to verify the cost-records of products or services that\ncontain their manufacturing cost, labour cost, overheads, etc. Cost Audit is a\ngenuine review of the accounting and records to be maintained according to Cost\nAccounting Standards.<\/p>\n\n\n\n<p>Section\n148(3) of Companies Act 2013 states that-<\/p>\n\n\n\n<ul>\n<li>Only\na Practicing Cost Accountant or a firm of cost accountant can be appointed as\ncost auditor and shall conduct cost audit of the company. <\/li>\n\n\n\n<li>The\nBoard of Directors shall appoint the Cost Auditor.<\/li>\n\n\n\n<li>The\nCost audit shall be conducted simultaneously with the Audit under section 143\nof the companies act,2013.<\/li>\n\n\n\n<li>The\nremuneration of the cost auditor shall be decided by the shareholders in such a\nmanner as may be prescribed. <\/li>\n<\/ul>\n\n\n\n<p><strong>Note:<\/strong> No individual appointed under section\n139 as an auditor of the company shall be appointed to audit cost records Rule\n14 of Companies (Audit and Auditor) Rules, 2014. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In view of this write-up, we can conclude that as per the Audit under Companies Act 2013. An auditor shall examine and verify the company&#8217;s financial statements to depict the company&#8217;s accurate and fair financial position. It is the responsibility of an auditor to provide shareholders and regulators with confidence in the efficacy of the company&#8217;s financial position.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our Article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/register-of-members-under-the-companies-act-2013\/\">Register of Members under the Companies Act, 2013\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>An audit is an independent form of examining any company&#8217;s financial position irrespective of its size and legal structure. The Audit is conducted to express an opinion thereon, which helps report and determine an accurate and fair view of a company&#8217;s financial position and operating result. The current write-up throws light on the audit under [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":40989,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[120],"tags":[2173],"acf":{"service_id":"321"},"authorName":"Priyanka Bajpayee","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/03\/IMG-20220303-WA0005.jpg","authorDescription":"A Company Secretary together with PG in international Business, she has gained significant experience as legal content writer. She has keen interest in doing research and writing on legal and financial subject matters. She also holds work experience in legal compliances.","postViews":54357,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/40982"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=40982"}],"version-history":[{"count":18,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/40982\/revisions"}],"predecessor-version":[{"id":68838,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/40982\/revisions\/68838"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/40989"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=40982"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=40982"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=40982"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}