Statutory Audit in India 2026: Process, CARO, Fees

A statutory audit is the audit of a company's annual financial statements by an independent Chartered Accountant, required by Sections 139 to 147 of the Companies Act, 2013 for every company regardless of size or turnover. The auditor reports whether the accounts give a true and fair view, the report goes to the AGM, and the audited accounts are filed with the ROC in Form AOC-4 within 30 days of the AGM.

Every Pvt Ltd, public, One Person and Section 8 company needs one, even with nil turnover. LLPs are audited under a different law, the LLP Act, 2008, and only above set limits. This guide covers the position as of October 2026 for FY 2025-26: the process, CARO 2020 applicability after the December 2025 change to the small company definition, auditor tenure and rotation, due dates and cost.

Statutory Audit at a Glance (FY 2025-26)

Item	Position as of October 2026
Law	Companies Act, 2013, Sections 139 to 147; Companies (Audit and Auditors) Rules, 2014
Who needs it	Every company — no turnover or capital threshold
Who can audit	A practising Chartered Accountant or a CA firm (including an LLP of CAs), not disqualified under Section 141
First auditor	Appointed by the Board within 30 days of incorporation; if the Board fails, by members within 90 days
Subsequent auditor	Appointed at the AGM for a term of five years, filed with the ROC in Form ADT-1 within 15 days
AGM	Within six months of year end, so by 30 September 2026 for FY 2025-26 (first AGM within nine months)
AOC-4 filing	Within 30 days of the AGM — for an AGM on 30 September 2026, by 30 October 2026
Late AOC-4	Additional fee of ₹100 per day of delay
CARO 2020	Applies to most companies; small companies, OPCs and private companies within set limits are excluded

As of 13 October 2026 the MCA had not extended the FY 2025-26 AOC-4 or MGT-7 due dates. The ₹100-a-day additional fee runs from the day after the due date, so do not plan around an extension that may not come.

What is Statutory Audit?

Statutory audit is an independent audit of the financial statements of a company by a Chartered Accountant firm, as required by the Companies Act, 2013. The auditor expresses an opinion on whether the financial statements give a "true and fair view" of the company's financial position.

Who Needs Statutory Audit?

Every Pvt Ltd / Public / Section 8 company
One Person Companies and small companies (audit applies; only CARO is excluded)
LLPs, under Rule 24(8) of the LLP Rules, 2009 — only where turnover exceeds ₹40 lakh AND contribution exceeds ₹25 lakh
Foreign companies operating in India
Nidhi companies
Producer companies

Statutory Audit vs Tax Audit vs Internal Audit vs Stock Audit

Audit	Law	Who needs it	Output
Statutory audit	Companies Act, 2013, s.139–147	Every company	Auditor's report (+ CARO where it applies), filed with AOC-4
Tax audit	Income-tax Act, 1961, s.44AB, for FY 2025-26	Businesses and professionals above the turnover / receipts limits	Form 3CA/3CB + 3CD, due 21 October 2026 this year
Internal audit	Companies Act, s.138 (prescribed classes)	Listed and larger companies; others by choice	Report to the Board / audit committee
Stock audit	No single statute — lender terms or management's own requirement	Borrowers on working capital limits, or any business by choice	Physical count and reconciliation report

They are separate engagements, and one firm can carry out more than one of them for the same company with separate scope and reports. See income tax audit and stock audit for those engagements.

Statutory Audit Process

Step 1: Appointment of Auditor

First auditor: appointed by the Board within 30 days of incorporation (or by members within 90 days if the Board fails). Subsequent auditor: appointed at the AGM for a term of five consecutive years, with Form ADT-1 filed within 15 days. Under Section 139(2), the listed companies and classes prescribed in Rule 5 — unlisted public companies with paid-up capital of ₹10 crore or more, private companies with paid-up capital of ₹50 crore or more, and companies with public borrowings or deposits of ₹50 crore or more — cannot appoint an individual auditor for more than one five-year term, or an audit firm for more than two. Other private companies are not subject to rotation. See auditor appointment.

Step 2: Pre-Audit Planning

Auditor plans the audit: scope, materiality, risk assessment, audit strategy, resources, timing.

Step 3: Books Finalisation

Books of accounts are finalised by the company: P&L, Balance Sheet, Cash Flow, Notes to Accounts (Schedule III).

Step 4: Fieldwork

Auditor + team test transactions, verify vouchers, sample data, raise queries, visit branches, do physical verification of inventory + fixed assets.

Step 5: Audit Report + CARO

Auditor issues the audit report. For applicable companies, also issues CARO 2020 (Companies Auditor's Report Order).

Step 6: Filing with ROC

Audit report is placed before the AGM. Form AOC-4 is filed with the ROC within 30 days of AGM.

CARO 2020 — Companies Auditor's Report Order

CARO 2020 (MCA Order S.O. 849(E) of 25 February 2020, applicable from FY 2021-22) is an additional report the statutory auditor gives on 21 matters in paragraph 3. It applies to every company, including foreign companies, except banking companies, insurance companies, Section 8 companies, One Person Companies, small companies, and private companies that are not a holding or subsidiary of a public company and meet all three limits: paid-up capital plus reserves and surplus not above ₹1 crore on the balance sheet date, borrowings from banks or financial institutions not above ₹1 crore at any time in the year, and total revenue not above ₹10 crore in the year.

Small company limits changed on 1 December 2025 (G.S.R. 880(E)): a private company whose paid-up capital does not exceed ₹10 crore and whose previous-year turnover does not exceed ₹100 crore is now a small company, unless it is a holding or subsidiary company, a Section 8 company or governed by a special Act. More private companies therefore fall outside CARO for FY 2025-26 — check the test on your own figures before the audit starts.

Company	Statutory audit	CARO 2020
Small company (≤ ₹10 crore capital and ≤ ₹100 crore turnover, not holding / subsidiary)	Required	Not applicable
One Person Company	Required	Not applicable
Section 8 company	Required	Not applicable
Private company within all three ₹1 crore / ₹1 crore / ₹10 crore limits, not holding / subsidiary of a public company	Required	Not applicable
Any other private company	Required	Applicable
Public company (listed or unlisted)	Required	Applicable

The 21 clauses of paragraph 3 of CARO 2020:

(i) Property, plant and equipment and intangible assets — records, physical verification, title deeds, revaluation, benami proceedings
(ii) Inventory — physical verification and discrepancies of 10% or more per class; quarterly returns to lenders where working capital limits exceed ₹5 crore
(iii) Investments, guarantees, security and loans or advances given
(iv) Compliance with Sections 185 and 186
(v) Deposits and deemed deposits
(vi) Maintenance of cost records under Section 148
(vii) Statutory dues — deposit, arrears and disputed amounts
(viii) Income surrendered or disclosed in tax assessments but not recorded in the books
(ix) Defaults in repaying loans and borrowings, and use of term loans
(x) Use of money raised by public issue and preferential allotment or private placement
(xi) Fraud and whistle-blower complaints
(xii) Nidhi companies
(xiii) Related party transactions under Sections 177 and 188
(xiv) Internal audit system
(xv) Non-cash transactions with directors under Section 192
(xvi) Registration under Section 45-IA of the RBI Act and core investment companies
(xvii) Cash losses in the current and previous year
(xviii) Resignation of the statutory auditor
(xix) Material uncertainty about meeting liabilities within one year
(xx) Unspent CSR amounts and their transfer
(xxi) Qualifications or adverse remarks in the CARO reports of group companies in the consolidated statements

Worked Example: Is This Company in CARO for FY 2025-26?

A private company, not a subsidiary of anyone, has paid-up capital of ₹50 lakh, reserves of ₹1.4 crore, a bank cash credit limit of ₹80 lakh and FY 2024-25 turnover of ₹14 crore. Under the old test it fails the CARO exemption — capital plus reserves (₹1.9 crore) and revenue are above the ₹1 crore and ₹10 crore limits. But with paid-up capital under ₹10 crore and previous-year turnover under ₹100 crore, it is a small company under the definition in force from 1 December 2025, and small companies are outside CARO altogether. The audit itself is still required.

AOC-4 Filing

Form AOC-4: Financial statements + audit report + directors' report
Due: 30 days from AGM (One Person Company: 180 days from the end of the financial year)
Late filing: additional fee of ₹100 per day of delay, on top of the normal filing fee
Documents: P&L, Balance Sheet, Cash Flow, Notes, Director's Report, Auditor's Report, CARO 2020 (if applicable)

Cost

Type	Cost
Statutory audit (small Pvt Ltd)	From ₹13,499
Statutory audit (mid-size Pvt Ltd)	From ₹24,999
Statutory audit (large / multi-entity)	From ₹44,999
Statutory audit + tax audit (combined)	Quoted on scope
Statutory audit + GST audit (combined)	Quoted on scope

Fees exclude GST. What moves the fee: transaction volume, number of branches and inventory locations, whether CARO applies, the state of the books when fieldwork starts, and whether consolidated statements are needed.

Documents the Auditor Will Ask For

Trial balance and finalised books for the year, with ledgers
Bank statements and bank reconciliations for every account, plus balance confirmations
Fixed asset register and the physical verification record
Inventory count sheets and valuation working as at 31 March
GST returns (GSTR-1, GSTR-3B) and the reconciliation to the books
TDS returns, Form 26AS / AIS and advance tax challans
Loan agreements, sanction letters and quarterly stock statements filed with banks
Minutes of Board and general meetings, statutory registers and related party list
Previous year's audited accounts and the auditor's appointment record (ADT-1)

Common Mistakes That Delay the Audit

Books still being closed in September, leaving no time for fieldwork before the AGM
Stock statements given to the bank that do not agree with the books — a CARO clause (ii)(b) remark once limits exceed ₹5 crore
No physical verification of inventory or fixed assets during the year
Director loans and related party balances not documented under Sections 185, 186 and 188
Assuming CARO applies (or does not) without testing the current small company limits
ADT-1 for the auditor's appointment never filed

Penalty for Non-Compliance

Contravention of Sections 139 to 146 by the company: fine of ₹25,000 to ₹5,00,000, and every officer in default is also liable to a fine (Section 147(1))
Auditor contravening Sections 139, 143, 144 or 145: fine of ₹25,000 to ₹5,00,000 or four times the remuneration, whichever is less; imprisonment up to one year where the contravention is knowing or wilful with intent to deceive (Section 147(2))
AOC-4 late filing: additional fee of ₹100 per day of delay
Professional misconduct by the auditor: disciplinary proceedings under the Chartered Accountants Act, 1949, and before NFRA where it has jurisdiction

Frequently Asked Questions

Q: Is statutory audit mandatory for a private limited company with no turnover?

A: Yes. Section 143 of the Companies Act, 2013 applies to every company, with no turnover or capital threshold, so a company with nil revenue still needs its accounts audited and filed in AOC-4. What a small company can be outside is CARO 2020, not the audit itself.

Q: What is the statutory audit deadline?

A: AGM within 6 months of FY end (by 30 September). Audit report placed before AGM. AOC-4 within 30 days of AGM.

Q: What is the difference between statutory audit and tax audit?

A: A statutory audit is required by the Companies Act for every company and covers the whole financial statements. A tax audit is required by the Income-tax Act only above turnover or receipts limits, and reports tax particulars in Form 3CD. A company above the tax audit limit needs both; the same CA firm can do both under separate reports.

Q: Does an LLP need a statutory audit?

A: Only above the limits. Under Rule 24(8) of the LLP Rules, 2009, an LLP is exempt if its turnover does not exceed ₹40 lakh or its contribution does not exceed ₹25 lakh. So an audit is needed only where turnover is above ₹40 lakh and contribution is above ₹25 lakh. See LLP annual compliance.

Q: Can the same CA firm do tax audit and statutory audit?

A: Yes, if the CA firm is the same. The same firm can issue both reports, but the engagement letter + fee + scope are separate.

Q: What is CARO 2020?

A: The Companies (Auditor's Report) Order, 2020 — an additional report by the statutory auditor on 21 matters, including fixed assets, inventory, loans given, deposits, statutory dues, fraud, related parties and going-concern indicators. It applies to most companies, but not to small companies, OPCs, Section 8 companies, banks, insurers, or private companies within the ₹1 crore capital, ₹1 crore borrowing and ₹10 crore revenue limits.

Q: How long is the auditor's tenure?

A: Every auditor appointed at an AGM holds office for five years. Only listed companies and the classes in Rule 5 — larger unlisted public and private companies, or those with ₹50 crore or more of public borrowings — must rotate: one five-year term for an individual auditor and two for a firm. Other private companies can reappoint the same auditor.

Q: Who appoints the first auditor of a new company?

A: The Board, within 30 days of incorporation. If the Board does not, it must tell the members, who appoint the first auditor at an extraordinary general meeting within 90 days. The first auditor holds office until the end of the first AGM, where the five-year appointment is made and ADT-1 filed.

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Statutory Audit of Companies in India — Process, Cost, CARO (2026)