## Types of Audit: Mandatory, Voluntary, and Tax Audit

### The Logic of Appointment

The report submission follows from the appointment, which in turn depends on the applicable law:

Companies → Auditor appointed under Companies Act → Statutory (Mandatory) Audit
Partnerships/Others → Partners appoint auditor → May be voluntary unless law mandates

### Classification by Requirement

Entity Type	Audit Requirement	Governing Law
Companies	Mandatory — no exception	Companies Act, 2013 (S. 139)
Proprietorship / Partnership / LLP	Not mandatory — can opt for voluntary audit	—
Entities crossing turnover/receipt threshold	Mandatory Tax Audit	Income Tax Act, 1961 (S. 44AB)

### Tax Audit (Section 44AB, Income Tax Act)

If turnover/gross receipts exceed the prescribed limit, the entity must get a tax audit done by a CA.
Report filed in Form 3CA/3CB (audit report) + Form 3CD (statement of particulars).
Tax audit is in addition to the statutory audit — a company may have both.

### Voluntary Audit

No legal obligation, but the entity chooses to get audited.
Useful for obtaining bank loans, attracting investors, or improving internal governance.

Worked example

### Example 1

Mandatory audit: A private limited company with ₹5 crore annual turnover must get its books audited under the Companies Act, 2013 regardless of profitability or size — this is a statutory (mandatory) audit.

### Example 2

Tax audit: A sole proprietor running a medical clinic with annual professional receipts of ₹75 lakhs (exceeding the prescribed threshold under S. 44AB) must get a tax audit done by a CA before filing the income tax return.

### Example 3

Voluntary audit: A partnership firm with ₹40 lakh turnover has no legal audit obligation. However, its bank requires audited financials for a working capital loan. The partners arrange a voluntary audit to satisfy the bank's requirement.

⚠️ Common exam mistakes

Assuming all entities require mandatory audit — only companies have unconditional mandatory audit; others depend on turnover or specific conditions
Confusing statutory audit (Companies Act) with tax audit (Income Tax Act) — both can apply simultaneously to the same company, covering different aspects
Thinking voluntary audits follow no standards — even voluntary audits must be conducted in accordance with Standards on Auditing (SAs) issued by ICAI
Forgetting that a company subject to both statutory and tax audit must comply with both — they serve different purposes

Reference: S. 139 (Companies Act 2013); S. 44AB (Income Tax Act 1961) — Section 139, Companies Act 2013; Section 44AB, Income Tax Act 1961

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