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Company Law · ROCStatutory audit vs internal audit vs tax audit: key differences
Business owners often confuse the three audits. A company may need a statutory audit every year, an internal audit above certain thresholds, and a tax audit depending on turnover. Here is a clear comparison with thresholds and examples.
"Audit" means an independent examination of records, but different laws require different audits for different purposes. Here are the three most common for businesses.
Comparison
| Point | Statutory audit | Internal audit | Tax audit |
|---|---|---|---|
| Law | Companies Act, 2013 (Sec 139–148); LLP Act (above thresholds) | Section 138 Companies Act | Income-tax Act – Sec 44AB (1961) / Sec 63 (2025) |
| Who needs it | Every company; LLPs above ₹40 lakh turnover or ₹25 lakh contribution | Listed, large public and private companies (thresholds) | Businesses above ₹1 crore (₹10 crore with ≤5% cash), professions above ₹50 lakh, presumptive cases below rate |
| Conducted by | Independent CA appointed by members | CA, CMA or other professional/employee as decided by board | CA in practice |
| Purpose | True and fair view of financial statements | Internal controls, risk, efficiency | Compliance with tax law; particulars for assessment |
| Report | Auditor's report + CARO (where applicable) | To board/audit committee | Form 3CA/3CB + 3CD (FY 2025-26) |
| Filed with | ROC (AOC-4) | Not filed | Income Tax Department |
| Timing | Before AGM | Periodic during the year | By 30 September (subject to extensions) |
CARO 2020
The Companies (Auditor's Report) Order, 2020 requires additional reporting by statutory auditors – fixed assets, inventory, loans, deposits, statutory dues, defaults, fraud, etc. Not applicable to: - one person companies and small companies; - private companies with paid-up capital + reserves ≤ ₹1 crore, borrowings ≤ ₹1 crore at any time in the year, and revenue ≤ ₹10 crore; - banking, insurance and Section 8 companies.
Worked example
Example: Four businesses in Delhi:
| Entity | Facts | Audits required |
|---|---|---|
| Kapoor Enterprises (proprietorship) | Turnover ₹3.1 crore, 8% cash receipts | Tax audit only |
| Aravali Paper Products (partnership) | Turnover ₹85 lakh, declares 9% under 44AD | None (presumptive at or above rate) |
| Sunrise Buildcon (OPC) Pvt Ltd | Turnover ₹6 crore | Statutory audit (CARO not applicable to OPC) + tax audit |
| A private company with turnover ₹240 crore | Borrowings ₹60 crore | Statutory audit with CARO + internal audit (turnover ≥ ₹200 crore) + tax audit |
How they interact
- Tax audit uses the audited financial statements (Form 3CA) where a statutory audit exists, so the statutory audit must finish first.
- Internal audit findings help statutory auditors assess controls.
- Disallowances found in tax audit (e.g. 40A(3), 43B(h)) do not change the financial statements but affect the tax computation.
Timelines for a company (FY 2025-26)
| Activity | Typical date |
|---|---|
| Statutory audit completed, board approves accounts | August–September 2026 |
| Tax audit report | 30 September 2026 (extended to 21 October 2026 for AY 2026-27) |
| AGM | By 30 September 2026 |
| AOC-4 | Within 30 days of AGM |
| ITR | 31 October 2026 (extended to 21 November 2026) |
Common mistakes
- Thinking a small company with low turnover does not need a statutory audit.
- Appointing the statutory auditor as internal auditor.
- Starting the tax audit before finalising accounts.
- Ignoring CARO applicability tests.
Key takeaway
Statutory audit is about the financial statements, internal audit about controls, and tax audit about tax compliance. Companies always need the first; the other two depend on thresholds. Our audit and assurance team conducts statutory and tax audits for companies, LLPs and firms.
Official references
Provisions discussed (summaries in our Law Library):
- Companies Act, 2013 – Section 143: Auditor's report; CARO
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
Is statutory audit compulsory for every company?
Yes. Every company, regardless of size or turnover, must have its financial statements audited by a chartered accountant under the Companies Act, 2013.
Which companies need an internal audit?
Listed companies; unlisted public companies with paid-up capital of ₹50 crore or more, turnover of ₹200 crore or more, borrowings of ₹100 crore or more, or deposits of ₹25 crore or more; and private companies with turnover of ₹200 crore or more or borrowings of ₹100 crore or more.
Can the statutory auditor also be the tax auditor?
Yes. The same CA firm can be the statutory and tax auditor. However, the internal auditor cannot be the statutory auditor of the same company.
Does a proprietorship need a statutory audit?
No. Proprietorships and partnership firms do not have a statutory audit requirement under company law, but may need a tax audit under the Income-tax Act.
Can a company skip statutory audit if it has no transactions?
No. Every company must have its accounts audited, even with nil activity.
Who appoints the internal auditor?
The board of directors, on the recommendation of the audit committee where applicable.
Is a separate tax audit report needed if accounts are audited?
Yes, if tax audit thresholds apply. Form 3CA is used, attaching the statutory audit, along with Form 3CD.
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
Have a tax, GST or business question?
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