A statutory audit is an audit required by law. In India the term usually means the annual audit of a company's financial statements by an independent chartered accountant under the Companies Act, 2013. The auditor ends with a report that tells shareholders whether the accounts give a true and fair view. This guide is the short version: who, how and what you get at the end.
Last reviewed: 17 October 2026. Facts checked. We searched for the appointment rules in section 139, the auditor's report requirements in section 143 and the CARO order. The results were secondary commentary and ICAI notes. We could not open the Act on mca.gov.in or ICAI's old material, so we did not read the statutory text. We have left out fees, limits and rotation numbers. For a fuller treatment, see our statutory audit meaning and due dates guide.
What "statutory audit" means
"Statutory" means the law requires it. Different laws require audits of different bodies, so the word covers several audits. In everyday use in India it means the company audit under the Companies Act. Search summaries say the Act's audit provisions (sections 139 to 148) came into force around 1 April 2014.
It is not the same as other audits you will hear about. A tax audit is a separate requirement under the income tax law, and an internal audit is an internal management function. See internal vs external vs statutory audit and types of audit in India.
Who needs one
Under the Companies Act, companies are required to appoint an auditor and have their financial statements audited. Other laws and regulators impose audit requirements on other kinds of entity. We have not verified the position for each type, so confirm with the governing law for your entity.
How the auditor is appointed
Per search summaries of section 139:
- The first auditor is appointed by the board within 30 days of incorporation. If the board does not do it, members appoint at a general meeting within 90 days.
- After that, the company appoints an auditor at its first annual general meeting, to hold office for a five-year term. Appointment needs an ordinary resolution.
- Form ADT-1 is filed after the appointment. The sources disagree on whether it is required for the first auditor, so check the current rules.
Before accepting, the auditor should run independence checks and an acceptance review. The audit engagement acceptance checklist covers the usual points.
The process in stages
| Stage | What happens |
|---|---|
| Acceptance | Independence, competence and terms are confirmed; engagement letter signed |
| Planning | Understand the business, assess risk, set materiality, agree the plan |
| Interim work | Test controls and early transactions; raise issues early |
| Year-end fieldwork | Test balances, confirmations, reconciliations, estimates |
| Completion | Review subsequent events, going concern, management representations, misstatements |
| Reporting | Issue the audit report and any additional reports |
Our audit process guide takes you through these stages with the relevant standards, and the statutory audit workflow guide covers the working papers.
The report
The audit report gives an opinion on the financial statements. The auditor can issue an unmodified opinion or modify it where there are misstatements or limits on the audit work.
Search summaries say section 143 also lists matters the auditor must report on, including whether the company has adequate internal financial controls over financial reporting and how effective they are. That requirement appears in section 143(3)(i). We have not confirmed the rule-level details. Our guide on sox controls vs IFC under section 143(3)(i) explains the difference between that test and a US-style attestation.
CARO
The Companies (Auditor's Report) Order, known as CARO, adds specific statements to the report for covered companies. Search summaries say the order applies to companies with listed exceptions and does not apply to the report on consolidated financial statements, apart from the clause on qualifications or adverse remarks in the CARO reports of group companies. Use our CARO 2020 checker to test applicability, and see the clause-by-clause guide.
What the company should prepare
- Complete, reconciled books and trial balance.
- Bank, loan and debtor or creditor confirmations ready to send.
- Fixed asset register and depreciation workings.
- Statutory dues schedules (GST, TDS, provident fund).
- Related party list and transactions.
- Management's assessment of going concern and key estimates.
Late or changed books after the audit starts are a common cause of delay.
Frequently Asked Questions
What is a statutory audit?
It is an audit required by law. In India it usually means the annual audit of a company's financial statements under the Companies Act, 2013.
Who appoints the statutory auditor?
The board appoints the first auditor. After that, members appoint at the annual general meeting, per search summaries of section 139.
How long does a statutory auditor's term run?
Per search summaries, from the first AGM to the conclusion of the sixth AGM, a five-year term. Check the Act for rotation rules.
What is in the statutory audit report?
An opinion on the financial statements and additional matters required by law, including the internal financial controls report where applicable and CARO statements for covered companies.
How is it different from a tax audit?
A statutory audit gives an opinion on the financial statements. A tax audit reports compliance with the income tax law in prescribed forms. See internal audit vs statutory audit vs tax audit.
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