Audit – An Imperative Process for Company Annual Compliance
Often the compliance for a company is stuck to adhering the annual compliance i.e. filings with RoC. However, the Private Company owners overlook the importance of the audit of books of accounts. Importance of the audit in any organisation is a vital process that ascertains the correctness and accuracy of the accounts to certain extent. This article aims to furnish the importance of the audit in annual compliance for a Private Limited Company process.
Audit & Auditor
An independent authority examine and evaluate the company’s accounts after preparation of its accounts, which ascertains whether the accounts provided by the organisation are correct or accurate, and if not the auditor provides his opinion in said matter. Although audit is an on-going process, it may be followed after preparation of books of accounts of the company. The aim of audit is reporting result to the shareholders (members) of the company. This is a tool to keep an eye on the quality of the information provided by the management to its shareholders who are not directly engaged in the business and operations.
The audit is performed by an independent Chartered Accountant in practice, known as Statutory Auditor for this purpose. Even if, requirement to change the auditor to maintain the independency is prescribed after completion of prescribed period, Private Limited Companies are excluded from such. The auditor of the company is appointed by the members of the company in its General Meeting, whereby the term and remuneration is decided. Intimation of auditor’s appointment to RoC is also an essential compliance.
The company must seek the consent of auditor for his appointment and the certificate to confirm his eligibility of being appointed under the Act. The intimation of auditor’s appointment is made by the company in e-form ADT-1.
Whether audit is necessary?
As discussed, the audit is a tool of inspection by the members. Further, the auditor would ensure whether the accounts prepared are in line of applicable regulations or not. Over and above to its necessity, audit is mandatorily applicable to every company, whether private or otherwise. The applicability does not see to turnover and transactions of the company. Whether it is zero or it ranges in millions, applicability is intact.
The financial statements audited by the Statutory Auditor along with the Auditor’s report are put before the members of the company in Annual General Meeting of every year. On their adoption by members, the financial statements are then furnished by the company to Registrar of Companies as part of annual compliance.
The AGM shall be held within 6 months of the end of financial year i.e. before 30th September of the next F.Y. Conducting AGM would require clear 21 days’ notice period to members and therefore, the process of audit must be completed at least before the month of September. If you are yet to audit your accounts, let LegalWiz.in help you with it. Simply write us at support@legalwiz.in.
Effect of audit in Annual Compliance:
The annual compliance for a Private Limited Company includes filing of two forms i.e. AOC-4 (filing financial statements) and MGT-7 (filing annual return). AOC-4 is reporting of the audited financial statement of the company along with necessary documents and details of Statutory Auditor. All the information of financial activity and operations of company are reported from the audited statements only.
Apart from RoC compliance, the company has to file the Income Tax Return, whereby the audited balance sheet and income statement is furnished. As the financial statements require audit in case of Private Limited Company, the due date for filing ITR 30th September of next F.Y.
Know about due dates:
Process of audit is followed by series of events that are included in Annual Compliance for Pvt Ltd. Only completion of audit is not necessary, but its reporting is vital. Below mentioned are the due dates for the compliance event, every Private Company has to pursue.
| Compliance Details | Due Date of compliance | Due date for F.Y. 2017-18 |
| Conducting Annual General meeting | Within 6 months of Financial Year End*
(Gap between 2 AGM shall not exceed 15 months) |
30th September, 2018
(or within 15 months of previous AGM) |
| Intimation of Auditor’s Appointment or re-appointment (if any) | Within 15 days of AGM held | Not later than 14th October, 2018 |
| AOC-4 (filing financial statements) | Within 30 days from conclusion of the AGM | 29th October, 2018 |
| MGT-7 (filing annual return) | Within 60 days from conclusion of the AGM | 28th November, 2018 |
| Filing Income Tax Return | 30th September of next F.Y. | 30th September, 2018 |
*If the company is to close its first Financial Year, AGM can be held within 9 months of F.Y. end i.e. 31st December, 2018 for F.Y. 2017-18.
Important Note: Since 1st July, 2018, the additional Government fee on late or non-filing of AOC-4 & MGT-7 is INR 100 for each day of delay. Therefore, the companies must adhere to on-time compliance for hefty late fees.
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CS Prachi Prajapati
Company Secretary with a forte in content writing! Started as a trainee, she is now leading as a Content Writer and a Product Developer on technical hand of LegalWiz.in. The author finds her prospect to carve out a valuable position in Legal and Secretarial field.
