Is Audit Mandatory for All Companies in India?

Table of Contents Toggle TL;DR Summary In India, a statutory audit is mandatory for every registered company — private limited, OPC, or public — regardless of turnover, while other audits are triggered by size thresholds: tax audit applies when business turnover exceeds ₹1 crore (₹10 crore for fully digital businesses), GST audit when turnover crosses ₹5 crore, internal audit when turnover exceeds ₹200 crore or loans exceed ₹100 crore, and secretarial audit for listed or large public companies with paid-up capital of ₹50 crore or more. Missing a mandatory audit for FY 2026–27 can result in an MCA notice, a tax audit fee of 0.5% of turnover up to ₹1.5 lakh under Section 271B, rejected ITR filings, and difficulty securing bank loans. PKC Management Consulting offers end-to-end audit coverage — statutory, tax, GST, internal, and secretarial — with 36+ years of experience across 1,500+ clients in India.

One of the most common questions business owners and first-time entrepreneurs ask is: Is an audit mandatory for all companies in India? The short answer is — it depends on the type of audit.

Some audits apply to every company registered in India, regardless of its turnover. Others kick in only after you cross a certain turnover or business size. Getting this wrong can lead to penalties, legal notices, and compliance problems.

This guide breaks it all down in simple language — who needs which audit, the exact limits for FY 2026–27, what documents you need, and answers to questions business owners ask most.

Is Audit Mandatory for All Companies? 

For companies registered under the Companies Act, 2013, yes, a statutory audit is mandatory for every registered company. Even a company with zero sales must get its accounts audited every year.

However, there are different types of audits, and not all of them apply to every company. Each of these audits serves a distinct purpose and is governed by a different law. For a deeper understanding of how they work individually and what benefits they deliver, see our comprehensive guide on the types of audits applicable to companies in India. Here is a quick overview:

 

Type of Audit	Mandatory For	Trigger
Statutory Audit	All companies (Pvt Ltd, Public, OPC)	Registration under the Companies Act
Tax Audit	Businesses & professionals crossing turnover limits	Turnover > ₹1 Cr (business) or ₹50 L (profession)
Internal Audit	Listed & large unlisted companies	Turnover > ₹200 Cr or loans > ₹100 Cr
GST Audit	GST-registered businesses	Turnover > ₹5 Cr in a financial year
Secretarial Audit	Listed & large public companies	Paid-up capital ≥ ₹50 Cr or turnover ≥ ₹250 Cr
Cost Audit	Specific manufacturing/service companies	As notified by the Central Government

 

Applicability Criteria & Threshold Limits (FY 2026–27)

Here is a detailed look at each audit type, who it applies to, and the exact threshold limits for FY 2026–27.

1. Statutory Audit

Governed by: Companies Act, 2013 (Sections 139–147)

A statutory audit checks whether a company’s financial statements give a true and fair picture of its finances. It is conducted by an independent Chartered Accountant (CA) who is not connected to the company.

Key Rule: Every company incorporated in India — including a one-person company (OPC), private limited company, or public limited company — must undergo a yearly statutory audit. There is no minimum turnover requirement. Even if your company earned ₹0 in the year, the audit is still compulsory.

 

Applicable to:

•       Private Limited Companies
•       Public Limited Companies
•       One Person Companies (OPCs)
•       Section 8 (non-profit) Companies
•       Government Companies

 

Important note: The auditor must be appointed at the first Annual General Meeting (AGM) and serves for a term of five years (subject to ratification at each AGM).

 2. Tax Audit (Under Section 44AB of the Income Tax Act, 1961)

A tax audit verifies that the income, expenses, and deductions you have reported in your Income Tax Return (ITR) are accurate. The auditor files a report using Form 3CA/3CB along with Form 3CD.

Threshold limits for FY 2026–27:

 

Category	Threshold	Condition
Business (general)	Turnover > ₹1 crore	Applicable if any cash transactions exist
Business (digital)	Turnover > ₹10 crore	Only if 95%+ of receipts & payments are digital (UPI, NEFT, RTGS, cards)
Professionals (doctors, lawyers, architects, etc.)	Gross receipts > ₹50 lakhs	No digital exception applies

 

FY 2026–27 Update: As per Budget 2026, the non-compliance fee (earlier called a penalty) under Section 271B is now formally classified as a ‘fee’ rather than a ‘penalty’. The financial amount remains the same: 0.5% of turnover or ₹1.5 lakh, whichever is lower. However, this reclassification is expected to reduce litigation. The last date to file the tax audit report for FY 2025–26 is 30 September 2026.

3. Internal Audit

Governed by: Companies Act, 2013 (Section 138)

An internal audit looks at the company’s internal controls, processes, and operational efficiency. Unlike a statutory audit, the internal audit report is for the company’s management.

Mandatory for: 

Company Type	Criterion 1	Criterion 2
Listed Companies	Always applicable	—
Unlisted Public Companies	Paid-up capital ≥ ₹500 crore OR Turnover ≥ ₹200 crore	Outstanding loans/deposits ≥ ₹100 crore
Private Companies	Turnover ≥ ₹200 crore	Outstanding loans ≥ ₹100 crore

 4. GST Audit

Governed by: GST Act, 2017

A GST audit checks whether your GST returns match your actual financial records. It ensures that the Input Tax Credit (ITC) you have claimed is correct and that all taxes have been paid properly.

•       Applicable to: Businesses with an annual turnover exceeding ₹5 crore in a financial year
•       What to file: GSTR-9 (Annual Return) along with GSTR-9C (Reconciliation Statement)
•       Conducted by: A Chartered Accountant (CA) or Cost and Management Accountant (CMA) 

5. Secretarial Audit

Governed by: Companies Act, 2013 (Section 204)

A secretarial audit checks whether a company follow all corporate laws, SEBI regulations, and other applicable rules. It is conducted by a Company Secretary (CS) in practice.

Mandatory for:

•       All listed companies
•       Public companies with paid-up capital of ₹50 crore or more
•       Public companies with turnover of ₹250 crore or more

6. Cost Audit

Governed by: Companies Act, 2013 (Section 148)

A cost audit examines the company’s cost record. The Central Government notifies specific industries that must conduct cost audits. These typically include sectors like cement, fertilisers, pharmaceuticals, sugar, and power.

Step-by-Step Audit Process & Timeline

Many business owners are unsure about what actually happens during an audit. Here is a clear, step-by-step breakdown of how the audit process typically works — particularly for a statutory or tax audit.

 Step 1: Appoint an Auditor (April – June)

Before the audit can begin, you need to formally appoint a Chartered Accountant (or CA firm). For a statutory audit, this appointment must be confirmed at the Annual General Meeting (AGM). For new companies, the first auditor must be appointed within 30 days of incorporation.

•       For a new company: Appoint the first auditor within 30 days of registration
•       For existing companies: Confirm reappointment at the AGM
•       For tax audit: Engage a CA before the September 30 deadline

Step 2: Share Business Information & Records (April – July)

The auditor will ask for information about your business — what you do, how you earn money, how you maintain records, and whether there have been any major changes during the year. Share documents such as bank statements, ledgers, GST returns, and sales/purchase invoices.

Step 3: Auditor Reviews & Tests Your Records (July – August)

The auditor goes through your financial records in detail. This includes:

•       Checking whether all income and expenses are properly recorded
•       Verifying bank balances against your books
•       Confirming stock (inventory) balances
•       Testing whether internal controls are working properly
•       Checking compliance with tax laws (GST, TDS, advance tax, etc.)

Step 4: Auditor Raises Queries & You Respond (August)

The auditor may have questions or find areas that need clarification. Respond promptly to avoid delays. This is also the time when any discrepancies or errors in your books are identified and corrected.

Step 5: Draft Report Is Shared (August – September)

The auditor prepares a draft report and shares it with management. For a statutory audit, this includes observations about the financial statements, any qualifications (issues found), and a final opinion on whether the accounts are true and fair.

Step 6: Final Report & Filing (September – October)

After you review the draft and respond to any observations, the final audit report is signed and submitted.

•       Statutory audit report: Submitted to shareholders and attached to the Annual Report
•       Tax audit report (Form 3CA/3CB + 3CD): Filed on the Income Tax portal by 30 September
•       GST reconciliation (GSTR-9C): Filed along with GSTR-9 by 31 December

Documents Required for Audit Preparation

Being prepared with the right documents before your auditor arrives can save a lot of time and reduce the chances of errors. Here is a comprehensive list of what you typically need for each type of audit.

For Statutory Audit

•       Audited financial statements of the previous year
•       Trial balance, general ledger, and sub-ledgers
•       Bank statements and bank reconciliation statements for all accounts
•       Cash book and petty cash records
•       Sales invoices, purchase invoices, and credit/debit notes
•       Stock (inventory) records and physical verification reports
•       Fixed assets register (list of all property and equipment)
•       Loan agreements and repayment schedules
•       Minutes of Board meetings and AGM
•       Statutory registers (register of members, directors, etc.)
•       ROC filings and MCA compliance records
•       TDS returns (Form 26Q, 24Q) and TDS certificates

For Tax Audit (Section 44AB)

•       All documents listed under statutory audit (if applicable)
•       Income Tax Return (ITR) of the previous year
•       Computation of taxable income and tax paid
•       Advance tax and self-assessment tax challans
•       Details of depreciation as per Income Tax rules
•       Payments made in cash exceeding ₹10,000 in a single day
•       TDS/TCS compliance records and 26AS reconciliation
•       Details of loans or deposits accepted/repaid during the year
•       Form 3CA or Form 3CB (depending on whether a statutory audit was done) 

For GST Audit

•       All GSTR-1, GSTR-3B, and GSTR-9 returns filed during the year
•       Purchase and sales register reconciled with GST returns
•       Input Tax Credit (ITC) register and reconciliation
•       E-way bill records for goods movement
•       Export/import documentation (if applicable)
•       Details of reverse charge transactions 

For Internal Audit

•       Process manuals and standard operating procedures (SOPs)
•       Internal control documentation
•       Previous internal audit reports and management responses
•       Risk register (if maintained)
•       HR and payroll records
•       Procurement and vendor management records 

Pro Tip from PKC: Start gathering these documents in March itself — before the financial year closes. A ‘pre-audit readiness checklist’ shared by your CA team can save weeks of back-and-forth and help you avoid last-minute errors. PKC’s audit team provides clients with a customised document checklist at the start of every engagement.

 Types of Audits for Companies in India

Different laws require different kinds of audits. Here is a summary of all the key audits a company may need to undergo, depending on its size, nature, and turnover. 

1. Statutory Audit

Mandatory for all companies. An external CA verifies the accuracy of financial statements and checks that they give a true and fair view of the company’s finances. The audit report is shared with shareholders and regulators. 

2. Tax Audit

Required when turnover exceeds ₹1 crore (or ₹10 crore for fully digital businesses). A CA reviews financial records to prevent misreporting and tax evasion, and files the report with the Income Tax Department. 

3. Internal Audit

Mandatory for larger companies. Reviews risk management, internal controls, and operational efficiency. Reports go to management — not to regulators. 

4. GST Audit

Required for businesses with an annual turnover above ₹5 crore. A CA or CMA reconciles GST returns with financial records. Businesses must file GSTR-9 and GSTR-9C. 

5. Secretarial Audit

Ensures compliance with corporate laws and SEBI norms. Mandatory for listed and large public companies. Conducted by a Company Secretary (CS) in practice and reported in Form MR-3. 

6. Cost Audit

For companies in specific sectors notified by the Central Government. Examines cost records and production processes efficiency.  

Why Choose PKC for Your Company’s Audit Needs?

PKC’s statutory audit of companies service is backed by over 36 years of experience, a team of 200+ professionals, and 1,500+ clients served across manufacturing, retail, healthcare, IT, and logistics. Here is what sets PKC apart:

Here is what sets PKC apart:

•       36+ years of experience delivering trusted audit and compliance services across India
•       Expert guidance through the full range of Indian audit requirements — statutory, tax, internal, GST, and secretarial
•       Tailored approach — we do not use a one-size-fits-all template. Every audit is customized to your business
•       Proprietary analytics that detect patterns conventional audits often miss
•       Minimal disruption — our processes are designed to respect your operational priorities
•       Actionable insights — we translate audit findings into clear, practical recommendations your team can act on
•       All-India Rank holders leading the firm, ensuring the highest standard of professional excellence 

PKC follows a structured five-step audit process:

1.     Define the scope — What areas will be covered, what is the timeframe, and what are the expected outcomes
2.     Plan and prepare — Develop the audit plan, identify the resources needed, and set up clear communication with your team
3.     Gather and analyze data — Review documents, interview key people, and test financial and operational processes
4.     Report findings — Prepare a clear report with findings and recommendations and present it to management
5.     Follow through — Support the implementation of recommended changes and conduct follow-up reviews to ensure continued compliance

Ready to get started? Speak with a PKC audit expert today. We will assess your specific audit requirements, explain exactly what applies to your company, and make the process as smooth and straightforward as possible. Visit pkcindia.com or call us to schedule a consultation.

Conclusion

So, is an audit mandatory for all companies in India? For a registered company, a statutory audit is non-negotiable. For Tax Audit, GST Audit, Internal Audit, and others, it depends on your size, turnover, and sector.

The most important thing is to know which audits apply to you and to plan for them well in advance. Missing an audit deadline or skipping a mandatory audit can lead to fines, legal notices, and business disruption — all of which are avoidable with the right guidance.

If you are unsure about your audit requirements for FY 2026–27, PKC is here to help. Our team will review your company’s profile and give you a clear, actionable compliance plan.

FAQ: Common Questions About Audits for Companies

Q1. Is an audit mandatory for a private limited company with zero turnover?

Yes. A statutory audit under the Companies Act is mandatory for all registered companies, including those with no revenue. Even if your company did not do any business in the year, you must still get your accounts audited and file the annual report with the MCA.

Q2. My business turnover is below ₹1 crore. Do I still need an audit?

If your business is a registered company (Pvt Ltd, OPC, etc.), you still need a statutory audit regardless of turnover. However, a tax audit under Section 44AB would not apply unless your turnover crosses ₹1 crore (or ₹50 lakhs for professionals). Partnership firms, proprietorships, and LLPs have different rules — the statutory audit requirement does not apply to them automatically. 

Q3. What happens if I do not get my company audited?

Skipping a mandatory audit can lead to serious consequences:

•       Fines under the Companies Act for the company and its directors
•       A tax audit fee of 0.5% of turnover (up to ₹1.5 lakh) under Section 271B if you miss the tax audit
•       Defective Income Tax Return filing, which the Income Tax Department can reject
•       MCA notices, which can affect your company’s good standing and future compliances
•       Difficulty getting bank loans (banks typically ask for audited financials)

Q4. Can the same CA do both the statutory audit and tax audit?

Yes, the same CA or CA firm can conduct both the statutory audit and the tax audit of the same company. In fact, this is common practice as it reduces duplication of work. However, for listed companies, there are specific independence requirements and rotation rules (auditors cannot serve more than two consecutive five-year terms).

Q5. What is the difference between an internal audit and a statutory audit?

A statutory audit is mandatory for all companies and results in a public report for shareholders and regulators — focused on whether financial statements are accurate. An internal audit is an internal management tool that reviews processes, risks, and operational efficiency, with findings shared only with management. Internal audits are mandatory only for larger companies that cross specific size thresholds. For a detailed comparison across 20 parameters, see our full breakdown of the key differences between statutory and internal audits.

Q6. Does a startup need to get audited?

Yes. If your startup is registered as a private limited company or OPC, a statutory audit is mandatory from the very first year — even if you are pre-revenue or loss-making. This is a common surprise for first-time founders. The good news is that audit fees for small startups are typically quite reasonable, especially if your transactions are limited and records are well maintained. 

Q7. What is the audit trail requirement introduced from April 2023?

Since April 1, 2023, all companies in India must maintain an audit trail of every accounting entry in their books. This means your accounting software must record who made each entry, when it was made, and if any entry was edited or deleted. Standard software (Tally, Zoho Books, and QuickBooks) are updated to support this. If your software does not have this feature enabled, your auditor may flag it as a finding.

Q8. How much does a company audit typically cost?

Audit fees vary widely based on the size and complexity of the company. A small private limited company with limited transactions may pay anywhere between ₹10,000 and ₹50,000 for a statutory audit. Larger companies with complex operations, multiple GST registrations, or international transactions will naturally incur higher fees. PKC provides transparent, customized audit fee quotes based on your specific business profile — get in touch with our team for an indicative estimate.

Frequently Asked Questions (FAQ)

Why do companies need an audit?

Companies need an audit for several reasons, including complying with regulatory requirements, identifying areas for improvement, and gaining investor or stakeholder confidence.

How often should a company conduct an audit?

The frequency of audits depends on the size and nature of the company’s operations. Our seasoned experts at PKC Management Consulting suggest performing audits at least once a year. 

Why should companies choose PKC for their audit needs?

At PKC, we are committed to providing accurate and relevant audit services. Our expertise in the country’s laws and regulations, focus on delivering valuable insights and ongoing support, and reputation for excellence speak for itself.

How long does it take for PKC to complete an audit?

The length of an audit depends on the size and complexity of the company’s operations. Our auditors can take several weeks to several months to complete an audit depending on the assignment.

How does PKC Management set the price of audits for companies?

The price for an audit is typically based on the size and complexity of the company’s operations, as well as the scope of the audit. We provide customized quotes for each client based on their specific needs and requirements.