In context to the Companies Act, 2013, what are the requirements for conducting a statutory audit as per Section 139, and how often should it be done?

Detailed Legal Analysis

Under the Companies Act, 2013, a statutory audit is required to be conducted by a company in accordance with Section 139, which outlines the appointment, qualifications, and obligations of auditors, as well as the frequency of audits.

The key requirements for conducting a statutory audit as per Section 139 are:

• Appointment of Auditor: Every company, other than a One Person Company (OPC), is required to appoint an individual or a firm as an auditor at the first annual general meeting (AGM) who will hold office from the conclusion of that meeting until the conclusion of its sixth AGM. This means that the auditor will be appointed for a five-year term, subject to ratification at each AGM until the 2017 amendment, which removed the requirement for annual ratification.
• Eligibility and Qualifications: Auditors must be a Chartered Accountant (CA) as per the Chartered Accountants Act, 1949, and must not be disqualified under any provisions of the Companies Act, such as being an employee of the company or having a business relationship with the company.
• Rotation of Auditors: Listed companies and certain prescribed classes of public companies are required to rotate their auditors after a maximum term of two consecutive terms of five years for individual auditors and two terms of five years for audit firms, as per Section 139(2).
• Audit Committee: Companies having a paid-up share capital of Rs. 10 crores or more are required to constitute an Audit Committee under Section 177, which will oversee the audit process and recommend the appointment of auditors.
• Statutory Audit Report: The auditor is required to provide a report on the accounts of the company, which must be laid before the AGM along with the financial statements.

In terms of frequency, the statutory audit must be conducted annually. Every company must have its financial statements audited for each financial year, and the auditor's report must be submitted to the shareholders at the AGM held after the end of the financial year. The financial year in India runs from April 1 to March 31 of the following year.

In conclusion, adherence to the provisions outlined in Section 139 and related sections of the Companies Act, 2013 is crucial for ensuring compliance, maintaining corporate governance, and enhancing transparency in financial reporting.