Private Limited Company Audit, Advantages and Importance
Auditing implies to the periodic assessment of accounts, vouchers, and documents. This financial reliability will assist the people to recognize the workplace.
Even though Private Limited Company is the most familiar form of starting a business, there are plenty of compliances to be followed once the business is incorporated. Managing the daily operations of business along with the following corporate laws are really tough for a business person. So, it is quite essential to seek a professional help and also be aware of any legal requirement to make sure the timely accomplishment of compliances without any imposing of any penalty.
There are some common compliance which are mandatory for a private limited company and they are
An auditor appointment – An Auditor must be appointed for consecutive five years, and for the same the form ADT-1 should be filed.
Statutory Audit of Accounts – A Company’s account should be prepared by every private company and a Charted accountant will audit it at the culmination of every financial year. The Auditor will provide an audit report and the audited financial statements to filing it up with Registrar.
Statutory Audit
The intention of a statutory audit is similar as the purpose of any other general audit. It helps to conclude whether an organization is submitting a credible and accurate representation of its financial condition by scrutinizing the information such as financial transactions, bookkeeping records and bank balances.
The importance of the audit for a Private limited company:
All private limited companies should comply with some legal requirements irrespective of its size and nature of the business. The following legal compliance must be compiled with all private limited companies.
As per Companies Act, all companies registered in India are necessitated to maintain books of
Accounts and it has to be audited by a practicing charted accountant every year after the completion
of each financial year.
The Management of the company will prepare the annual return and financial statements along with
the audited report must be filed with the Registrar of Companies.
There is no any specific time for conducting the company’s annual audit.
It is necessary that every private limited company need to conduct their annual general meeting
within six months from the closing of the financial year to present audited financial statements
before the shareholders.
The company should give 21 clear day notice to conduct the Annual General Meeting. Companies
registered in India are required to get their accounts audited before sending an official notice for
Annual General Meeting.
In order to comply with the Companies Act, every registered company must get their accounts
audited by a Chartered accountant and carry out their annual general meeting within the stipulated
time. They shall file their Annual return with the register of companies before 30 days from the date
of keeping Annual general meeting.
What are the advantages of auditing for a private limited company?
Business Objectives
An effective audit system is always necessary for a company as it enables to follow and reach its
assorted corporate objectives. There will be a need of various categories of internal control for
business processes in order to assist monitoring, supervision, detect and prevent jagged transactions,
maintain the adequate level of business records, and to escalate operational productivity.
Risk of Misstatement
In a company’s financial report, the risk of material misstatement will be assessed by the Auditor. A
company cannot be able to develop credible financial reports for external/internal purposes without
a proper audit or internal control system.
Deters fraud and inefficiency:
Auditing which is carried out has to be within the claimed accounts department. If the public
contains a separate ownership firm then from insurance claims, the claims have to be
resolved.
High-quality perfection:
It is true that every establishment strives hard for their success. When the entire auditing gets over,
the financial representation of data can be collected which deals with the interpretation of high-
quality perfection.
Regular audit:
Regular audit deals with the accounts that are made easy to involve the insured claims which may
develop fear among the employees in order to gain confidence in the related auditing sections.
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