MCA May Remove Audit Requirement for Small Companies With Turnover Up to Rs 1 Crore
The Ministry of Corporate Affairs (MCA) is planning to bring a significant change to the audit requirement for small companies in India. As per reports, the government is likely to end the mandatory statutory audit requirement for companies with an annual turnover of up to Rs 1 crore. If this change is approved, it will be introduced through an amendment to Section 139 during the Winter Session of Parliament.
At present, companies, including the one-person companies, small companies and closely held private firms, have to appoint an auditor and get their accounts audited every year. The companies are required to conduct annual general meetings and file documents like AOC-4 with the Registrar of Companies (ROC). For small enterprises with very limited transactions, the audit reports often do not reveal major issues; still, they increase their compliance cost, creating an unnecessary burden. Removing this requirement may help the companies to avoid this burden.
However, the experts say that if companies under Rs 1 crore are exempt from both tax audit and statutory audit, the financial reporting integrity might not be monitored. Without audits, the accuracy of financial statements and the overall discipline of maintaining proper records may weaken.
The suggestion is still under consideration and has not been finalised. If, once, the proposal is introduced in the Winter Session of Parliament, the amendment is likely to get a lot of attention, as it will significantly affect the companies.
