Statutory audit (the external audit) gives members an opinion on the financial statements. Tax audit gives the tax department a report on compliance with income-tax provisions. Internal audit helps management and the audit committee improve controls through the year. They differ in law, appointer, purpose and report.
Facts checked: 9 October 2026, under the Companies Act, 2013 and the Income-tax Act, 1961.
Side-by-side comparison
| Point | Statutory audit | Tax audit | Internal audit |
|---|---|---|---|
| Law | Companies Act 2013, ss.139-143 | Income-tax Act, s.44AB | Companies Act s.138 (for covered companies); ICAI SIAs |
| Who appoints | Members at the AGM (Board for first auditor) | The assessee | Board or audit committee |
| Purpose | Opinion on true and fair view | Report on books and tax particulars | Evaluate risk, controls and governance |
| Reports to | Members | Assessee, filed for the tax authority | Audit committee or board |
| Scope | Financial statements for the year, plus IFC and CARO 2020 | Books and particulars in Form 3CD | Processes chosen by the audit plan |
| Report | Audit report, CARO 2020 report, IFC report | Form 3CA/3CB with Form 3CD | Internal audit report with observations and action plans |
| Timing | After year-end | Before the date prescribed for the return | Continuous or periodic |
| Performed by | Chartered accountant | Chartered accountant | CA, cost accountant or other professional |
Internal audit vs external audit
"External audit" in Indian company practice means the statutory audit. The key contrasts are independence of reporting line and purpose. The statutory auditor looks backward at whether the numbers are fairly stated and answers to members. The internal auditor looks at how work is done and answers to the board. The statutory auditor may rely on internal audit work (SA 610), but cannot hand over responsibility for the opinion. Section 144 also bars the statutory auditor from doing the company's internal audit.
Statutory audit vs tax audit
The two can be signed by the same CA, but they are separate reports with separate purposes.
- Different question. Statutory audit asks whether the financial statements give a true and fair view. Tax audit asks whether the books are kept, and the tax particulars reported, correctly under the Income-tax Act.
- Different trigger. A company needs the first every year. The second applies only when a section 44AB limit is crossed. A company with ₹70 lakh turnover still needs a statutory audit but may need no tax audit.
- Different deadline. Tax audit is tied to the income-tax return calendar, statutory audit to the AGM calendar.
See section 44AB for the thresholds.
Worked scenario
A private company has ₹6 crore turnover, 3% cash receipts and 4% cash payments. The statutory auditor issues an opinion and CARO report for the members. The tax audit under 44AB(a) is required only if turnover exceeds ₹1 crore and the cash tests do not allow the ₹10 crore limit; here both cash tests pass, so the ₹10 crore limit applies and a 44AB(a) audit is not triggered, unless another clause applies. The board meanwhile asked for a quarterly internal audit of procurement. That report goes to the audit committee, not to members.
Frequently asked questions
Is internal audit mandatory for every company?
No. Section 138 and the rules cover listed companies and unlisted companies above prescribed limits. Others may choose to have it.
Does a tax audit replace the statutory audit?
No. Neither substitutes for the other.
Can management rely only on the statutory audit to find control gaps?
The statutory auditor reports on internal financial controls over financial reporting, but does not design or test every operational control. That is the internal audit's role.
Who signs which report?
The statutory auditor signs the audit report; a CA signs the tax audit report; the internal auditor signs the internal audit report.
Read next: what is statutory audit and types of audit. For the engagement scope, use the engagement letter template, and see the MRL guide for the representation letter in a statutory audit.
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