Last Updated on October 6, 2026
Yes. Private limited companies in India are generally required to undergo a statutory audit every financial year, regardless of their turnover or profitability, subject to the applicable provisions of the Companies Act, 2013. The company must appoint an eligible auditor and have its financial statements audited as part of its annual compliance requirements.
This makes annual statutory audit an important compliance requirement for private limited companies, alongside other annual filings and corporate compliance obligations.
Many founders confuse this requirement with a tax audit, which depends on separate income-tax conditions. They also assume that a five-year auditor appointment means an audit is required only once in five years. Neither assumption is correct.
Quick Summary
A Private Limited Company is generally required to have its accounts audited every financial year, subject to the applicable provisions of the Companies Act, 2013 and related rules.
- A statutory audit is generally required for a Private Limited Company every financial year, even if the company has little or no business activity.
- The company must appoint a statutory auditor in accordance with the Companies Act and applicable requirements.
- The auditor examines the company’s books of accounts and financial statements and issues the applicable audit report.
- Audit requirements are separate from other annual obligations such as financial statement filing and annual return filing with the MCA.
- Maintaining proper accounting records throughout the year helps make the audit and annual compliance process smoother.
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Why Is Annual Audit Mandatory for a Private Limited Company?
The Companies Act establishes the framework for maintaining the accounts, preparing financial statements, appointing auditors and reporting to the members. Relevant provisions include Sections 128, 129, 134, 139 and 143.
An annual statutory audit provides an independent opinion on the financial statements. It helps shareholders to assess and examine whether the accounts present a true and fair view under the applicable reporting framework. The requirement follows the company’s legal structure. It does not depend on whether the business has become profitable or reached a particular revenue level.
Example: Two founders incorporate a company to develop software. During the first financial year, they spend money on development but earn no revenue. Their company still needs an audit of its financial statements.
If you’re weighing this against an LLP structure instead, see our guide on LLP audit applicability. Unlike a private company, an LLP’s audit obligation only kicks in above ₹40 lakh turnover or ₹25 lakh capital contribution.
Do Companies with Zero Turnover or Losses Need an Audit?
Yes. Zero turnover and business losses do not exempt a private limited company from an annual statutory audit.
A company without sales may still have share capital, bank balances, incorporation expenses, software subscriptions, loans or outstanding payments. These items belong in its accounts and financial statements.
Similarly, a loss-making company must report its expenses, liabilities and financial position correctly. The auditor examines the financial statements regardless of whether the final result is a profit or loss.
| Company situation | Annual statutory audit required? |
| Newly incorporated and yet to start operations | Yes |
| No sales during the financial year | Yes |
| Expenses incurred but no revenue earned | Yes |
| Business operating at a loss | Yes |
| Low turnover and limited transactions | Yes |
| Startup funded by its founders | Yes |
If your company has little activity, a short compliance review can help identify the records needed for its annual audit.
Are Small Companies and Startups Exempt from Audit?
No. Qualifying as a small company or startup does not provide a general exemption from statutory financial statement audit.
Some company categories receive specific reporting or procedural relaxations. For example, eligible companies may have simplified requirements for certain statements or additional auditor reporting.
However, an exemption from an additional reporting requirement does not mean that the annual financial statements can remain unaudited.
CARO, the Companies (Auditor’s Report) Order, requires additional reporting for companies within its scope. Certain categories, including small companies, are excluded from CARO. They nevertheless remain subject to statutory audit. CARO’s own small-company exclusion uses specific thresholds: paid-up capital plus reserves not exceeding ₹1 crore, borrowings not exceeding ₹1 crore from any bank or financial institution, and turnover not exceeding ₹10 crore, distinct from the general Companies Act definition of a small company. A company can qualify as ‘small’ generally but still fall outside CARO’s exemption if it crosses these specific figures.
What Is the Difference Between Statutory Audit and Tax Audit?
Statutory audit applies to every private limited company. Tax audit applies when the relevant income-tax conditions are met.
| Audit type | Main purpose | Applicability |
| Statutory financial statement audit | Independent opinion on annual financial statements | Every private limited company |
| Tax audit | Reporting prescribed tax particulars and compliance information | Companies meeting applicable income-tax conditions |
| Internal audit | Review of controls, processes and operational risks | Prescribed companies; others may adopt it voluntarily |
For ordinary business turnover, the general tax audit threshold is turnover exceeding ₹1 crore. It increases to ₹10 crore when both aggregate cash receipts and aggregate cash payments do not exceed 5% of their respective totals. The two tests must be checked separately.
Professional activities and special business categories may have different rules. Private limited companies should not assume that presumptive taxation concessions available to certain other taxpayers apply to them.
The relevant tax period also matters: –
- FY 2025–26: The Income-tax Act, 1961 framework continues to apply, including Section 44AB.
- Tax years beginning on or after 1 April 2026: The corresponding audit provision is Section 63 of the Income-tax Act, 2025. A company below the applicable tax audit threshold still requires its Companies Act audit.
Where both requirements apply, the statutory audit can support tax audit compliance, but the prescribed tax reporting must also be completed. Tax audit reports for FY 2025-26 (AY 2026-27) are filed in Forms 3CA/3CB and 3CD under Section 44AB. From Tax Year 2026-27 onward, under Section 63 of the Income-tax Act, 2025, a single consolidated Form No. 26 replaces these three forms worth knowing if you’re planning audit timelines spanning this transition.
Who Can Conduct a Private Limited Company Audit?
The statutory auditor must satisfy the qualification and eligibility requirements under Section 141 of the Companies Act.
An eligible chartered accountant in practice or qualifying audit firm, including an eligible LLP, may be appointed. Where a firm is appointed, only chartered accountant partners are authorised to act and sign on its behalf.
Independence matters: employment relationships, financial interests and other statutory disqualifications must also be considered. See our complete guide on appointment of auditors under the Companies Act, 2013 for the full eligibility and disqualification framework under Section 141.
Directors remain responsible for the financial statements, accounting records and explanations supplied to the auditor. Keep the auditor’s consent, eligibility documentation, appointment resolution and relevant filing records organised from the beginning; our ADT-1 filing service handles this end to end.
When Should the First Auditor Be Appointed?
For an ordinary non-government private limited company, the Board must appoint the first auditor within 30 days of registration under Section 139(6).
If the Board fails to do so, it must inform the members. The members must then appoint the auditor at an extraordinary general meeting within the prescribed 90-day period.
The first auditor holds office until the conclusion of the first annual general meeting.
Keep the auditor’s consent, eligibility documentation, appointment resolution and relevant filing records organised from the beginning.
Government-owned or controlled companies follow a different appointment framework and should assess their specific requirements.
Since 14 July 2025, file Form ADT-1 within 15 days of the Board’s first-auditor appointment as well the revised form now includes a specific ‘First Auditor’ category, and while Section 139(6) itself doesn’t expressly require this filing, the MCA V3 portal effectively does, and skipping it can block later filings such as AOC-4. See our dedicated guide on whether ADT-1 is mandatory for the first auditor appointment for the full documentation checklist and filing steps.
Does a Five-Year Auditor Appointment Remove the Annual Audit Requirement?
No. Appointment tenure and audit frequency are different.
Under the ordinary framework, members appoint an auditor at the first AGM to hold office until the conclusion of the sixth AGM, subject to the applicable statutory provisions.
That tenure does not allow the company to combine five financial years into one audit. Each year’s financial statements require a separate audit and report.
When Must the Annual Audit Be Completed?
There is no single audit completion date that suits every company. Plan completion around the financial statements, their circulation to members and the applicable AGM deadline.
For an ordinary private limited company: –
| Compliance event | Ordinary statutory timeline |
| First AGM | Within nine months after the first financial year closes |
| Subsequent AGM | Within six months after financial year-end, also observing the maximum gap between AGMs |
| Filing adopted financial statements with ROC | Generally, within 30 days of the AGM |
Applicable AGM extensions and special circumstances must be considered. An OPC follows separate meeting and filing provisions.
Financial statement filing is generally made through the applicable AOC-4 form or variant. See our annual compliance filing services for private limited companies for how AOC-4, MGT-7, and ADT-1 all fit into one compliance calendar.
If an AGM is not held, Section 137 still requires the financial statement filing within the prescribed period linked to when the AGM should have been held. Missing the meeting does not suspend the filing obligations.
Planning the audit before the AGM season can make annual compliance easier to manage.
What Documents Are Required for the Annual Audit?
The precise checklist depends on the company’s activities. Commonly requested records include: –
| Record category | Typical documents |
| Accounting records | Trial balance, ledgers and accounting data |
| Banking | Statements, reconciliations and loan records |
| Revenue and purchases | Invoices, contracts and supporting records |
| Tax compliance | Relevant GST, TDS and income-tax records |
| Employees | Payroll details and applicable statutory contribution records |
| Assets and inventory | Asset register, stock records and valuation schedules |
| Corporate records | Incorporation documents, minutes and share capital records |
| Outstanding balances | Receivable, payable and related-party schedules |
Auditors may also seek balance confirmations, management representations and explanations for unusual entries.
How Much Does a Private Limited Company Audit Cost?
There is no single audit fee applicable to every private limited company.
Fees depend on transaction volume, business complexity, locations, accounting quality, inventory, borrowing arrangements and the scope of applicable reporting.
Ask for a written scope covering statutory audit, tax audit where applicable, bookkeeping support and annual filing assistance. These services may be priced separately.
What Happens if a Company Skips Its Annual Audit?
Skipping the audit can prevent the company from completing compliant financial statements and related annual filings. The legal consequences depend on the actual default. Failure to appoint an auditor, breach of audit provisions, and delayed financial statement filing involve different provisions.
Additional filing fees and statutory penalties may arise. Exposure can extend to responsible officers, depending on the relevant section. Unaudited or overdue accounts can also complicate loan applications, investor due diligence and business transactions.
If earlier years remain incomplete, prepare a year-wise list of missing accounts, appointments and filings. Completing the latest year’s audit alone does not resolve earlier defaults.
Under Section 147, failure to comply with the audit-related provisions of the Act can attract penalties on the company and on every officer in default, with the specific amount depending on which provision was breached; a missed auditor appointment, a defective audit report, or an auditor’s own failure to report a fraud each carry different consequences. Beyond the direct penalty, delayed financial statements also compound into separate late-filing fees under Section 137 for the AOC-4 filing itself.
Conclusion
Private limited companies need an audit for every financial year, including years with low sales, no operations or losses. The main distinction is between mandatory statutory audit and separately applicable tax or internal audit requirements.
Directors should appoint an eligible auditor, maintain reliable and credible records and plan completion around financial statement approval and annual filings. Addressing these steps early makes compliance more predictable and helps to prevent small accounting gaps from becoming larger problems.
For clarity on your company’s annual audit obligations, consider a review with a qualified compliance professional.
Need Help With Your Private Limited Company’s Annual Audit?
Get professional assistance with statutory audit, financial statements, AGM requirements and annual ROC compliance to keep your company compliant every year.
Frequently Asked Questions
1. Is an audit compulsory for a private limited company with no income?
Yes. A private limited company must have its annual financial statements audited even when it earns no income. Capital, expenses, assets and liabilities still need to be accounted for.
2. What is the turnover limit for statutory audit of a private limited company?
There is no minimum turnover threshold for a Companies Act statutory audit. Tax audit thresholds are separate and do not determine whether the annual company audit is required.
3. Can a company’s director conduct its statutory audit?
No. A director is an officer of the company and is disqualified from acting as its statutory auditor. Being a chartered accountant does not remove that disqualification.
4. Does an inactive company still need an audit?
An ordinarily registered company cannot skip an audit simply because operations have stopped. Formally registered dormant companies follow a separate compliance framework, which also includes an audited financial position. See our guide on what happens to a company that does no business for years for the dormant-status and strike-off process in full.
5. Is internal audit mandatory for every private limited company?
No. Under the prescribed rules, it applies to private companies with preceding-year turnover of ₹200 crore or more or qualifying outstanding bank or public financial institution borrowings exceeding ₹100 crore at any point during that year.
