## Audit Requirements — Mandatory and Voluntary

### Mandatory Audits (Under Law)

These audits are required by statute — the entity has no choice.

Entity Type	Governing Law
Companies	Companies Act, 2013
Banking Companies	Banking Regulation Act, 1949
Electricity Companies	Electricity Act
Cooperative Societies	Respective State Co-operative Society Acts
Public and Charitable Trusts	Trust laws / local acts
Corporations set up under Act of Parliament or State Legislature	Respective constituting Act
Specified entities	Income Tax Act (various sections)

### Voluntary Audits

No legal requirement, but audit is undertaken for practical reasons:

Reason	Example
Proprietorship / Partnership / HUF	No statutory audit, but may choose audit for own assurance
Internal rules	Partnership deed may stipulate audit
Loan / grant sanction	Bank or government body requires audited accounts as a precondition

Worked example

### Example 1

M/s Sharma & Sons is a partnership firm. No law requires them to get audited. However, their bank requires audited accounts to renew their working capital facility. This is a voluntary audit driven by a loan sanction condition.

### Example 2

ABC Cooperative Housing Society must get its accounts audited under the Maharashtra Co-operative Societies Act. This is a mandatory audit under a specific statute — the society cannot opt out.

⚠️ Common exam mistakes

Assuming all audits are statutory — many audits are voluntary and driven by practical necessity.
Stating companies are audited under the Income Tax Act — companies are primarily governed by the Companies Act, 2013 for statutory audit purposes.
Forgetting that internal rules (e.g., partnership deed) can make an otherwise voluntary audit effectively compulsory for that entity.

Reference:

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