Indian companies are registered under the companies act of India. Such companies are required to undergo annual audit of their books of accounts by a chartered accountant in practice. Company audit is also called external or statutory audit.
Initially, when a company is registered in India, they have to appoint their first auditor who will be conducting audit of books of accounts starting from the date of registration to the end of the financial year. Then every year at the accounting year end, auditor will be either reappointed or appointed by the shareholders in the annual general meeting.
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After appointment, they will conduct audit of books of accounts as maintained by the management from time to time. At the year end, they need to submit a report to the shareholders which will in turn be presented in an Annual General Meeting by the directors in addition to the financial statements as prepared by the management.
After conducting the AGM, audit report and financial statements are to be filled with their respected ROC of the state where company’s registered office is situated.
Audits are designed to confirm that the companies are operating as per Indian laws applicable to them. Objective of conducting company audit is to determine, among other things, whether;
- Proper accounting records are maintained, it is accurate and complete.
- Accounts as prepared by the managements are in accordance with the provisions of accounting standards as applicable in India.
- The statements prepared present a true and fair view of the organization’s financial position.
Accounting standards are prescribed by the Institute of chartered accountants of India to which a chartered accountant is a member. Such accounting standards are applicable to all the companies registered in India.
Company auditor is to be appointed every year in an annual general meeting. A company can not appoint them for more than one financial year in an annual general meeting i.e. if you want the same firm to be appointed then in every annual general meeting you need to reappoint them. It’s the responsibility of the management to prepare books of accounts and not the auditor’s. A company auditor should not prepare books of accounts of a company in which they are appointed as a statutory auditor as they are appointed to conduct independent audit of the books of account.