• According to the Institute of Chartered Accountants of India:
  “Auditing is defined as a systematic and independent examination of data, statements, records, operations and performance (financial or otherwise) of an enterprise for a stated purpose.
  In any auditing situation, the auditor perceives and recognizes the proposition before him for examination, collects evidence, evaluates the same and on this basis formulates a judgment which is communicated through an audit report.
  An audit is an independent examination of financial information of an entity, irrespective of its size and form, when such examination is conducted with a view of expressing an opinion thereon.”

• Broadly Audits are classified into 2 buckets

  • Internal Audit - Internal audits are conducted on behalf of management in order to analyze the company's operations including financial and non-financial operations. Internal audits may be performed by an independent party or by the company’s own internal staff.
    

  • Statutory Audit - Statutory Audit is conducted at the insistence of the Statutory Authorities - Government departments. Such audits are performed by qualified auditors who are working as external and independent parties. The audit report of a statutory audit is made in the form prescribed by the government department.

• Statutory Audit in India is required under mainly the following statutes:

  • Companies Act, 2013

    • Financial Audit - Section 139

    • Cost Audit - Section 148

    • Secretarial Audit - Section 208

  • Income Tax Act, 1961 - Section 44 AB

  • CGST Act 2017 - Section 35(5)- currently dispensed away

  • The Co- Operative Societies Act, 1912 - Section 17

• In some industries, Industry specific Audits are also mandated by their respective statutes:

The above is an example list and is not all inclusive.

• For certain Companies, an Internal Audit System is mandated as per the Companies Act in India and the Statutory Auditor is required to confirm if the system is commensurate with the size of the Company

• Banking act requires internal audit of bank branches to be conducted

• Internal Audit also includes specific audits to identify any material weakness or bottlenecks in process and benchmarking for best in class approach

• System control testing and ERP testing are also types of internal audit