Do I Always Need To Get My Books Of Accounts Audited?

Audit as its name suggests is an inspection of the books of accounts and making a report by an independent auditor. Every entrepreneur while operating its business has to always keep in mind the audit of the books of accounts for its business or profession. Audit of the books of accounts is governed by the laws under which books of accounts are required to be maintained – Income Tax Act, The Companies Act and The Goods & Services Tax Act.

Under Income Tax Laws

As per The Income Tax Act, every resident individual, firm, LLP and company are liable for Tax Audit under the following scenario as per section 44AB of the Income Tax Act.  

• In case of a business its annual gross turnover exceeds Rs. 1 crore. 
• In case of a profession its annual gross receipt exceeds Rs. 50 lakhs.
• In case of a business has turnover of less than Rs. 2 crores and has claimed net income estimated at lower than 8% of the turnover as per the presumptive taxation u/s 44AD.
• In case of a profession has gross receipt of less than Rs. 50 lakhs and has claimed net income estimated at lower than 50% of the gross receipts as per the presumptive taxation u/s 44ADA.
• In case of a business of plying, hiring and leasing of goods carriages and having less than 10 vehicles and income is shown at a lower rate of Rs. 1000/- per ton per month per vehicle for Heavy Good Vehicle and at a rate of Rs. 7500/- per month per vehicle for light Good Vehicle as per presumptive taxation u/s 44AE.

Under Companies Act

Statutory Audit

As per the Companies Act all companies are requires to get its books of account compulsorily audited every year to be known as Statutory Audit. An LLP is only required to get its books of accounts audited in case its turnover is more than Rs. 40.0 lakhs in any financial year or its contribution is more than Rs. 25 lakhs. Apart from the requirement of the Companies Act, all companies and LLP, if they come under the preview of the requirement of Tax audit as per section 44AB of the Income Tax Act as discussed above, have to comply with such requirement also.

Cost Audit

Apart from statutory audit the companies are required to comply with Cost audit as per the section 148 of the Act under the following circumstances:

• In case the company is engaged in the business of a regulated Sector as specified in the Act and its annual turnover from all its products and services during the immediately preceding financial year is Rs. 50.0 crores or more and the aggregate turnover of the individual product or products or services for which cost records are required to be maintain is Rs. 25.0 crores or more.
• In case the company is engaged in a Non-regulated Sector as specified in the Act and its annual turnover from all its products and services during the immediately preceding financial year is Rs. 100.0 crores or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintain is Rs. 50.0 crores or more.

Internal Audit

Apart from statutory audit and cost audit companies are also required to comply with internal audit as per section 138 of the Act under the following circumstances:

• Every listed company
• Every unlisted public company having

1. paid up share capital of Rs. 50.0 crores or more during the preceding financial year; or
2. turnover of Rs. 200.0 crores or more during the preceding financial year; or
3. outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100.0 crores or more at any point of time during the preceding financial year; or
4. outstanding deposits of Rs. 25.0 crores or more at any point of time during the preceding financial year

• Every private company having

1. turnover of Rs. 200.0 crores or more during the preceding financial year; or
2. outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100.0 crores or more at any point of time during the preceding financial year:

Under GST Law

As per the Goods & Services Tax Act, every registered person whose aggregate turnover during a financial year exceeds Rs. 2.0 crores required to get his accounts audited as specified under the Act.