Private Limited Company Audit
Overview
Private Limited Company is a form of business with limited liability protection to its shareholders. The registration of Private Limited company can be done with a minimum of two people. The Private Limited company has the ability to raise equity funds and enjoys a separate legal entity. This form of the company formations is the most recommended type of business in our country and it best suits for small and medium sized businesses that are family owned or professionally managed.
According to the Companies Act, it is mandatory for all the companies registered in India to maintain books of accounts and get it audited by a practicing Chartered Accountant after the closing of each financial year. It is the responsibility of the directors of the company to get the books of accounts audited. This process of compliances also involves the appointment of an auditor. The auditor then evaluates the accounts and also produces the Audit report. The Audited financial statements are filed with the Registrar of Companies (ROC) of the respective area.
There are different types of Private Limited Audit. They are as follows:
Internal Audit: The internal private limited audits are conducted as per the will of the internal management. It is done to check the health of the company’s finances and also analyzes the operational efficiency of the organization. Internal Audits are generally performed by an independent party or by the company’s own internal staff. This type of audit helps the internal management to know about all the finances and also to make the required changes to increase the efficiency in operations.
Statutory Audit: The statutory private limited audits are performed to understand the state of a company's finances and accounts of the Government. These type of audits are usually performed by the qualified auditors those who are working as external and independent parties. The audit report of a statutory private limited audit is made in the prescribed format by a Government agency. Hence, a statutory audit is mainly done to know the actual economic status of the concerned firm.
Cost Audit: The private limited company will perform cost private limited audit as per the following criterion:
Companies under Item A:
- Companies with an annual turnover in the next financial year from all its products and services of Rs. 50 crore or more.
- Companies having an aggregate turnover of the individual product or services of Rs. 25 crores or more.
For companies under Item B:
- Companies having an annual turnover in the immediately preceding financial year of Rs. 100 crore or more from all its products and services.
- Companies having an aggregate turnover of Rs. 35 crore or more.
Company Audit
In a private limited audit, the provisions of a company audit are explained in the Companies Act, 2013. The companies irrespective of their nature of business or turnover needs to get their annual accounts audited at the end of every financial year.
- For private limited audit purposes, the company and the directors of the company must first appoint an auditor at the outset.
- The shareholders of the company at each Annual General Meeting (AGM) must appoint an auditor.
- The appointed auditor will hold the position from one Annual General Meeting (AGM) to the conclusion of the next AGM.
- Therefore after the completion of the term, the auditor needs to be changed.
The following persons are specifically disqualified from becoming an auditor as per the Companies Act:
- Corporate Body
- An Officer or an Employee or of the employees or partner with an employee of the company.
- Superior of the employees or partner with an employee of the company.
- Any person who has guaranteed to the company on behalf of another person a sum exceeding INR1,000 or is indebted to a company for a sum exceeding INR1,000.
-
Anybody who has held any type of securities in the company after one year from the date of commencement of the Companies Act, 2000.
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