Statutory Audit is a type of audit which is mandated by a Statute or Law to ensure true and fair view of the book of accounts of a Business is presented to the Regulators and the Public. Statutory audits must be completed by qualified Chartered Accountants who are independent of the business. Further, the report prepared by the Auditor on his/her findings must be presented in the format prescribed by the Regulator. The main purpose of statutory audit is to provide an independent, true and fair picture of the financial position of the Company to the shareholders.

1. As per the Companies Act, 2013, every company, irrespective of its sales turnover or nature of business or capital must have its book of accounts audited each financial year. All companies (Private Limited Company, One Person Company, Limited Company, Section 8 Company, Nidhi Company, Producer Company), irrespective of nature of business and sales turnover must appoint a Statutory Auditor and thereafter conduct an audit of its financial statements each financial year.
2. All Limited Liability Partnership (LLP) must have its accounts audited if the annual sales turnover exceeds Rs.40 lakhs or if the capital contribution exceeds Rs.25 lakhs, irrespective of the nature of business.

1. As per sub-section (1) of Section 139 of the Companies Act 2013, the first auditor of a non-government company shall be appointed by the Board of Directors within thirty days from the date of registration of the company and in the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting. The tenure of such auditor shall be until the conclusion of first annual general meeting wherein such auditor or some other auditor may be appointed for a term of 5 (five) years till the conclusion of sixth AGM. The company shall inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed.

2. In the case of a Government company , the first auditor shall be appointed by the Comptroller and Auditor-General of India within sixty days from the date of registration of the company and in case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next thirty days; and in the case of failure of the Board to appoint such auditor within the next thirty days, it shall inform the members of the company who shall appoint such auditor within the sixty days at an extraordinary general meeting, who shall hold office till the conclusion of the first annual general meeting.

If Casual Vacancy is arising due to the resignation of auditor, it shall be filled within 30 days by the Board of Directors, and the recommendation so made by the Board shall be approved in a general meeting (it can be Extraordinary General Meeting or Annual General Meeting) convened within 3 months from the date of recommendation of the Board. Any auditor appointed in a Casual Vacancy shall hold office until the conclusion of the next Annual General Meeting.
Where Casual vacancy is arising by other than resignation then vacancy shall be filled by the Board within 30 days.
In the case of a company whose accounts are subject to audit by an auditor appointed by the Comptroller and Auditor-General of India, be filled by the Comptroller and Auditor-General of India within thirty days.

Rotation is applicable to a listed company and following classes of companies excluding OPC and small companies:

a. All unlisted companies having paid-up share capital of rupees ten crore or more
b. All private companies having paid-up share capital of rupees fifty crore or more
c. All companies having paid up capital below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.
Such companies shall not appoint or re-appoint:
1. an individual as auditor for more than one term of five consecutive years
2. an audit firm as auditor for more than two terms of five consecutive years

According to Provisions of Section 141(3) of the Companies Act, 2013, the following persons shall not be eligible as auditors of the company:

1. A body corporate other than LLP registered under the LLP Act, 2008

2. An officer or employee of the company.

3. A person who is a partner or who is in the employment, of an officer or employee of the company.

4. A person who or his relative or partner
a. is holding any security/interest in the company or its subsidiary or of its holding or associate company or subsidiary of such holding company. It has been further provided that a relative may hold security or interest in the company of face value not exceeding one lac rupees.
b. is indebted to the company or its subsidiary, or its holding or associate company or subsidiary of such holding company, in excess of Rs. 5 lacs rupees
c. has given a guarantee or provided any security in connection with the indebtedness of any third person to the company or its subsidiary, or its holding or associate company or a subsidiary of such holding company for value in excess of Rs. 1 lacs.

5. A person or a firm who (whether directly or indirectly) has a business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company.

6. A person whose relative is a director or is in the employment of the company as a director or key managerial personnel.

7. A person
a. who is in full-time employment elsewhere or
b. a person or a partner holding appointment as its auditor is at the date of such appointment or reappointment holding an appointment as an auditor for more than 20 companies.

8. A person who has been convicted by a court of an offense involving fraud and a period of ten years has not elapsed from the date of such conviction.

9. Any person whose subsidiary or associate company or any other form of entity is engaged as on the date of appointment in consulting or specialized services in reference to the provision of Section 144 of the Companies Act, 2013.