In India, audits are essential processes to ensure
transparency, accuracy, and compliance with various legal, tax, and regulatory
frameworks. Depending on their purpose and scope, audits can be categorized
into several types under the Companies Act, 2013, and other Indian laws.
Major Types of Audits in India
1. Statutory Audit
A statutory audit is mandatory for all companies,
regardless of size or turnover. Conducted by a Chartered Accountant, it
assesses whether the company’s financial statements present a true and
fair view of its financial position. This ensures compliance with the
Companies Act and accounting standards. The audit report is submitted to
shareholders and regulators.
2. Internal Audit
Internal audits evaluate the operational efficiency,
internal controls, and risk management systems of a company. They are
required for listed and large unlisted companies meeting specified thresholds
of turnover, capital, or borrowings. The findings are reported to the company’s
management to strengthen internal governance.
3. Tax Audit
Under Section 44AB of the Income Tax Act, 1961, a tax
audit is mandatory for businesses with turnover exceeding ₹1 crore (or ₹10
crore if 95% of transactions are digital). It ensures proper maintenance of tax
records and accurate assessment of income, deductions, and returns to prevent
evasion.
4. Cost Audit
A cost audit applies primarily to manufacturing
and production-based industries. Conducted by a Cost Accountant, it
verifies cost accounting records, production efficiency, and adherence to
government-notified standards. This promotes transparency in pricing and cost
control mechanisms.
5. Secretarial Audit
Secretarial audits, performed by a Practicing Company
Secretary (PCS), examine compliance with corporate governance and legal
frameworks, including SEBI, the Companies Act, and Listing Regulations. This
audit is mandatory for listed companies and large public corporations.
6. GST Audit
Applicable to companies with turnover exceeding ₹5 crore,
a GST audit reconciles financial statements with GST returns to
ensure accurate tax reporting and claim of Input Tax Credit (ITC). The
reconciliation is filed using Form GSTR-9C.
Optional or Specialized Audits
- Forensic
Audit: Investigates fraud, embezzlement, or financial mismanagement.
- Compliance
Audit: Ensures adherence to statutory and regulatory obligations.
- Environmental
Audit: Reviews operational impact on the environment and
sustainability reporting.
- Information
Systems Audit: Examines IT controls, data security, and system
integrity.
Each audit type contributes to maintaining financial discipline, operational reliability, and investor confidence across corporate entities.