Businesses often need more than one type of audit to remain compliant and efficient. An auditor means a professional who reviews specific areas of a business to ensure accuracy and compliance. Choosing the right auditor depends on the area that needs review. Common types include internal, statutory, cost, tax, secretarial, forensic, government, compliance and IT auditors. Each focuses on a specific aspect of the business, helping reduce risks, meet regulatory requirements and make better decisions.
What are the different types of auditors?
Here are the common types of auditors and their roles in businesses:
-
Internal auditor
Internal auditors evaluate financial processes, internal controls, risk management and operational efficiency. They act as an early warning system by identifying risks and inefficiencies.
Under Section 138 of the Companies Act, 2013, the following companies must appoint an internal auditor:
- Listed companies
- Unlisted public companies with turnover ≥ ₹200 crore, paid-up capital ≥ ₹50 crore or outstanding deposits > ₹250 crore
- Private companies with turnover ≥ ₹200 crore or loans ≥ ₹100 crore
Internal auditors can be Chartered Accountants, Cost Accountants or other professionals.
-
External/statutory auditors
External or statutory auditors are independent professionals appointed to audit a company's financial statements. They certify whether the financials present a true and fair view of the business.
Under Section 139 of the Companies Act, 2013, every company must appoint a statutory auditor.
-
Cost auditors
Cost auditors specialise in examining cost records, allocation methods and pricing accuracy, particularly for production, manufacturing or regulated sectors. They analyse production costs, review costing methods and identify areas of wastage, helping businesses improve pricing and protect margins.
In India, cost audits are mandatory for certain industries under Section 148 of the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules, 2014, based on sector and turnover limits:
- Regulated sectors (petroleum, pharma, fertilisers, sugar, telecom, electricity, etc.): overall turnover ≥ ₹50 crore, product/service turnover ≥ ₹25 crore.
- Non-regulated sectors (cement, steel, automobiles, paper, etc.): overall turnover ≥ ₹100 crore, product/service turnover ≥ ₹35 crore.
Cost audits must be conducted by a practising Cost and Management Accountant (CMA) registered with the Institute of Cost Accountants of India.
-
Tax auditors
Tax auditors verify that income, expenses and deductions are correctly reported, and tax liability is accurately calculated.
Tax audits are required under Section 44AB of the Income Tax Act, 1961, for businesses and professionals exceeding these thresholds:
- Businesses with total sales, turnover or gross receipts > ₹1 crore
- Professionals (doctors, lawyers, consultants, etc.) with gross receipts > ₹50 lakh
- Businesses with >95% digital transactions: threshold raised to ₹10 crore
- Businesses or professionals declaring income below presumptive limits under Sections 44AD, 44ADA or 44AE, where total income exceeds the basic exemption limit
Audits are conducted by practising Chartered Accountants (CAs). Reports are filed in Form 3CA/3CB along with Form 3CD, due by 30 September of the assessment year.
-
Secretarial auditors
Secretarial auditors ensure the company complies with legal and governance requirements, including the Companies Act, SEBI regulations, FEMA, Secretarial Standards and labour laws. They focus on how the company is governed and managed.
In India, secretarial audits are mandatory under Section 204 of the Companies Act, 2013, for:
- Listed companies and their material unlisted subsidiaries (per SEBI LODR)
- Public companies with paid-up share capital ≥ ₹50 crore
- Public companies with turnover ≥ ₹250 crore
- Companies (including private) with loans/borrowings from banks or financial institutions ≥ ₹100 crore
Secretarial audits must be conducted by a practising Company Secretary (CS) registered with ICSI. Reports are submitted in Form MR-3 and annexed to the Board's Report at the AGM.
-
Forensic / investigative auditors
Forensic auditors investigate suspected fraud or financial misconduct. They uncover what happened, trace funds, reconstruct records and provide evidence admissible in legal or regulatory proceedings.
Forensic audits are often directed by:
- Serious Fraud Investigation Office (SFIO) under Section 212 of the Companies Act, 2013
- SEBI, Enforcement Directorate (ED) or voluntary commissions by the Board, lenders or during IBC proceedings
They are triggered by:
- Suspected embezzlement, misappropriation or fraud
- Credible whistleblower complaints or anonymous tips
- Significant unexplained variances in records
- Regulatory inquiries or M&A due diligence
Forensic auditors are usually practising CAs, often with credentials such as Certified Fraud Examiner (CFE) or ICAI’s Certificate in Forensic Accounting and Fraud Detection.
-
Government auditor
Government auditors review the utilisation of public funds across government departments, PSUs and government-funded bodies. They detect fraud, ensure compliance with government accounting standards and maintain accountability.
In India, audits are conducted by the Comptroller and Auditor General of India (CAG) under Articles 148–151 of the Constitution. For government companies, the CAG appoints statutory auditors under Sections 139(5) and 143(6) of the Companies Act, 2013.
They cover:
- Central and state government departments and ministries
- Government companies with ≥ 51% government ownership
- Autonomous bodies funded substantially by the government
- Private entities receiving significant government grants
The CAG can also conduct supplementary/test audits and issue directions to statutory auditors.
-
Compliance auditor
Compliance auditors verify that a business follows laws, regulations and industry standards, especially in regulated sectors such as banking, insurance, healthcare and fintech. They identify gaps and flag risks before they become serious issues.
Compliance audits are mandated by regulators such as the RBI, SEBI, IRDAI and under the Digital Personal Data Protection (DPDP) Act, 2023. Common areas include:
- Regulatory filings and disclosures (MCA, SEBI, RBI, IRDAI)
- Data protection and privacy obligations
- Environmental, Health and Safety (EHS) regulations
- Industry-specific licensing conditions
Compliance audits are conducted at least annually or as required by the regulator.
-
Information systems (IT) auditor
IT auditors assess technology infrastructure, data security and the integrity of systems processing financial and operational data, including ERP platforms such as Tally, SAP or Oracle. They identify vulnerabilities, test performance and verify transaction accuracy.
IT audits are mandatory for banks and insurance companies under RBI and IRDAI guidelines. Listed companies must comply with SEBI’s cybersecurity and data governance rules. The IT Act, 2000, provides a broader framework for data security obligations.
IT audits are relevant for:
- Banks, NBFCs and insurance companies
- Listed companies with high digital transaction volumes or ERP dependency
- Businesses handling sensitive customer or financial data
- Companies after a data breach, ERP migration or system upgrade
IT audits should be conducted at least annually.
Conclusion
Auditors are more than just compliance requirements; they help keep your business accurate, controlled and reliable. From financial checks to risk management and governance, they provide clarity on how your business truly operates. Auditing is not just about identifying mistakes; it is about preventing them before they happen.
With the right processes and tools, such as TallyPrime, businesses can stay organised, minimise errors and approach audits with confidence rather than stress. Effective auditing does not slow your business; it builds trust, stability and control, creating a foundation for growth.
Start integrating structured audit processes today to grow your business with clarity and confidence.
