Statutory Audit Checklist for Companies: What Auditors Look for in 2026

What is a Statutory Audit?

A statutory audit is a legally mandated examination of a company's financial statements and accounting records, conducted by an independent Chartered Accountant. Under the Companies Act, 2013, every company — regardless of size — must have its financial statements audited annually. The auditor's report is filed with the Registrar of Companies (ROC) as part of the annual filing and is a matter of public record.

For FY 2025-26, auditors are placing increased emphasis on revenue recognition, related party transactions, and CARO 2020 disclosures — areas where non-compliance is most frequently observed.

Pre-Audit Preparation: Management's Checklist

Complete bank reconciliation for all accounts as at 31 March 2026
Ensure physical verification of fixed assets is completed with a signed certificate
Conduct and document physical stock count with valuation at cost or NRV (whichever is lower)
Reconcile trade receivables and payables ledgers with confirmations for balances above ₹1 lakh
List all related party relationships and transactions for the year (Section 188, AS-18/Ind AS 24)
Ensure all statutory registers under Companies Act are updated (Board minutes, shareholder register, etc.)
Collect all loan agreements, lease agreements, and material contracts entered during the year
Prepare a schedule of contingent liabilities (pending litigations, tax demands under appeal)

Financial Statement Review — Key Areas

Revenue Recognition

Auditors verify that revenue is recognised in accordance with Ind AS 115 (or AS 9 for non-Ind AS companies). Common issues include recognition of revenue before performance obligations are met, bill-and-hold arrangements, and long-term contract accounting. Ensure revenue schedules reconcile with invoices and MIS data.

Fixed Assets & Depreciation

Asset addition and disposal schedules must be prepared and agreed to supporting documents (purchase orders, invoices, board resolutions for disposals). Depreciation rates must comply with Schedule II of the Companies Act or the rates used in prior years (with justification for any changes).

Loans & Advances

Any loans given to directors, related parties, or subsidiaries require board approval and must comply with Section 185 and 186 of the Companies Act. Auditors check for interest charging, proper documentation, and whether the company has violated any provisions that would require prior approval from members.

CARO 2020 Requirements

The Companies (Auditor's Report) Order, 2020 requires auditors to comment on 21 specific matters. Key areas of focus in 2026 include:

Clause 3(i)(c): Whether any immovable property held in company's name matches with property registers
Clause 3(vi): Whether the company has accepted deposits and complied with RBI / Companies Act provisions
Clause 3(xi): Whether any fraud by or on the company has been noticed or reported during the year
Clause 3(xiv): Whether internal audit system commensurate with size and nature of business exists
Clause 3(xx): Whether the company has complied with CSR provisions if applicable

Internal Controls — What Auditors Test

Segregation of duties in cash handling, purchase approval, and payroll processing
Purchase order–invoice–payment three-way matching for procurement
IT general controls: user access management, change management, backup and recovery
Inventory controls: movement records, bin cards, FIFO/LIFO consistency
Revenue controls: credit approval, dispatch confirmation before invoicing

Common Audit Findings — Avoid These

Related party transactions not approved by the Board at required thresholds
Section 43B disallowances — statutory dues deposited after year end but claimed in the same year
Advances to vendors outstanding for more than 6 months without adequate justification
GST Input Tax Credit (ITC) claimed in books but not reflected in GSTR-2B
TDS short-deducted or not deposited within due dates

Our audit team at G. S. SONPAL & ASSOCIATES conducts statutory audits for private limited companies, LLPs, and trusts across Rajkot, Morbi, and Ahmedabad. We take a process-driven approach — the audit outcome is determined by how well-prepared the company is before we arrive. Reach out for a pre-audit readiness review.