Audit Assignments

Audit Limits

An audit is the examination of financial books of an Organisation.

Chartered accountants from ICAI or The Institute of Chartered Accountants of India can do independent audits of any organisation. But, there is a limit on the maximum number of audits that can be performed by a Chartered Accountant in practice. This maximum number is limited to 60. In case of a firm the restriction on tax audit limit will be applicable for each of the partners.

In the following article, we will discuss about limit of two types of audits:

  • Statutory Audit under companies Act - A statutory audit is a legally required review of the accuracy of a company's (or government's) financial statements and records. It is another name of financial audit. An auditor needs to examine all the financial reports and the statements to determine the financial position of a Company. The purpose of a statutory audit is to ensure that these accounts represent a fair and accurate picture of the company’s current financial position on the date of the balance sheet.

statutory auditor is an external or outside third party/ service supplier who has the responsibility to certify the financial statements of a company.

There is a limit on the maximum no. of statutory audits that an auditor can undertake. This limit is specified as 20 in Section 141(3) (g) of Companies Act 2013. As per the provisions of the section mentioned above, the following persons cannot be appointed as an auditor of any company:

  • a person who is full time employment 
  • An individual or a partner of the firm that has been already appointed as auditor of the company is performing audit assignments of more than 20 companies. 

This maximum no. of 20 does not include OPC (one Person Company), dormant, small companies and private limited companies with less than Rs 100 crore paid up capital.


  • Tax Audit under Income Tax Audit: A Tax Audit is an examination of one's Tax Return to verify that one's declaration of income and deductions are accurate. In IndiaTax Audit is compulsory under the Income Tax Act (if only the total turnover exceeds the prescribed limits). A tax audit is compulsory for the following entities under section 44AB of Income Tax Act:
  • For businesses having  total sales turnover of over Rs. 1 crore
  • For professionals having total gross receipts of more than Rs. 50 lakhs

Tax audit by a certified Chartered Accountant is compulsory in the above-mentioned two cases. This audit is applicable depending on the turnover or gross receipts and not every year.

An individual/professional who evaluates the various financial records of a company to determine whether they comply with the applicable laws. This also involves ensuring correct accounting practices. A tax auditor can be internal (one who performs other accounting functions), external (third parties working independently) and government auditors (appointed by IRS for conducting adhoc and random audits). 

As per Chapter VI of Council General Guidelines, 2008, a member of the Institute in practice shall not accept, in a financial year, more than 60 tax audit assignments as prescribed under Section 44AB of the Income Tax Act, 1961. Tax audits conducted under section 44AD, 44ADA and 44 AE shall not be considered in the maximum limit of 60. This maximum limit of 60 is applicable for each partner (in case of firms having more than one partner). 

Why are these limits required?

  • The main objective is regulate the conduct of the members of the Institute in carrying out their professional duties
  • To uphold and ensure the quality of work done in all assignments
  • To assure proper allocation & distribution of assignments to all professionals certified under ICAI.