Glossary

The terms that come up in an Indian statutory audit.

Short, literal definitions — 231 terms, each with its own page. Where a term has a full working guide on /resources, its page links there instead of repeating the depth.

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Accounts Payable (AP): Amounts a business owes its suppliers for goods or services already received but not yet paid for.
Advance Ruling (GST): A binding ruling obtained from the GST Authority for Advance Rulings on the applicability of GST to a specific transaction before it is undertaken.
Adverse Opinion: An opinion stating that the financial statements do not give a true and fair view, issued when misstatements are both material and pervasive.
Annual Return (Form MGT-7): A yearly filing with the Registrar of Companies containing particulars of the company's shareholding, directors and other statutory information as at the close of the financial year.
Arm's Length Price: The price that would be charged in a comparable transaction between unrelated parties — the benchmark against which a related-party transaction's pricing is assessed.
Asset Disposal: The derecognition of a fixed asset from the books, with any gain or loss computed as the difference between the net disposal proceeds and the asset's carrying amount.
Audit Committee: A board-level committee required under Section 177 for specified companies, responsible for oversight of financial reporting, the appointment and remuneration of auditors, and related party transactions.
Audit Evidence: Information an auditor uses to support a conclusion — documents, confirmations, recomputation, observation. The standard of evidence is that it be sufficient and appropriate, not merely present.
Audit Opinion: The auditor's formal conclusion on whether the financial statements give a true and fair view, expressed as unmodified, qualified, adverse or a disclaimer.
Audit Risk: The risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated — the product of the risk of material misstatement and detection risk.
Audit Sampling: Selecting less than 100% of a population to test, and projecting the result to the whole. Distinct from full-population testing, where every transaction is tested and nothing is projected.
Audit Trail: A record of who did what, when, in a system or a file — including what a value was changed from and to. Also the name of a specific Companies Act compliance requirement for accounting software to log edit history.
Bank Guarantee: A bank's commitment to pay a beneficiary on a customer's behalf if the customer fails to meet an obligation — a contingent liability requiring disclosure, not recognition on the balance sheet.
Bank Reconciliation Statement (BRS): A reconciliation between the cash book balance and the bank statement balance, explaining every difference (outstanding cheques, unrecorded charges, deposits in transit).
Blocked Credit (Section 17(5)): Categories of input tax credit specifically disallowed under the CGST Act, such as credit on motor vehicles for personal use or on goods lost or stolen, regardless of whether conditions are otherwise met.
Board's Report: The report the directors present to shareholders alongside the financial statements each year, covering operational performance, CSR, related-party transactions and other matters required under Section 134.
Books of Account: The complete set of financial records a company is legally required to maintain under Section 128 of the Companies Act, forming the basis from which the financial statements are prepared.
Capital Work-in-Progress (CWIP): Costs incurred on an asset under construction or development that has not yet been brought into use, carried separately from completed fixed assets.
Capitalisation Threshold: A minimum cost a company sets, below which an item is expensed rather than capitalised as a fixed asset, even if it otherwise meets the definition.
CARO (Companies Auditor's Report Order): An order under the Companies Act requiring statutory auditors of specified companies to report on additional matters beyond the standard audit opinion — fixed assets, inventory, loans, statutory dues and more.
CARO Clause 3(ii) — Inventory: Requires reporting on whether physical verification of inventory has been conducted at reasonable intervals, and whether any discrepancies of 10% or more in aggregate for any class of inventory were properly dealt with in the books.
CARO Clause 3(iv) — Sections 185 and 186 Compliance: Requires reporting on whether the company has complied with Sections 185 and 186 of the Companies Act regarding loans, investments, guarantees and security given to other entities.
CARO Clause 3(ix) — Default in Repayment: Requires reporting on whether the company has defaulted in repayment of loans or borrowings to any lender, including the period and amount of default.
CARO Clause 3(v) — Deposits: Requires reporting on whether the company has accepted deposits or amounts deemed to be deposits, and whether the relevant provisions of the Companies Act and RBI directions have been complied with.
CARO Clause 3(vi) — Cost Records: Requires reporting on whether cost records have been made and maintained as prescribed by the Central Government, where applicable to the company's business.
CARO Clause 3(vii) — Statutory Dues: Requires reporting on the regularity of depositing undisputed statutory dues (GST, PF, ESI, income tax and others), and the extent and nature of any disputed dues.
CARO Clause 3(viii) — Unrecorded Income: Requires reporting on whether any transactions not recorded in the books have been surrendered or disclosed as income in tax assessments, and if so, whether this has been properly recorded.
CARO Clause 3(x) — Utilisation of Issue Proceeds: Requires reporting on whether money raised through an initial public offer, further public offer, or private placement of shares or debentures was utilised for the purposes it was raised for.
CARO Clause 3(xi) — Fraud Reporting: Requires reporting on whether any fraud by or on the company has been noticed or reported during the year, the nature and amount involved, and whether a fraud report under Section 143(12) was filed.
CARO Clause 3(xii) — Nidhi Company Compliance: Applicable only to Nidhi companies, requiring reporting on compliance with the net owned funds to deposits ratio and other Nidhi-specific regulatory requirements.
CARO Clause 3(xiii) — Related Party Compliance: Requires reporting on whether related party transactions comply with Sections 177 and 188 of the Companies Act and have been disclosed as required by the applicable accounting standards.
CARO Clause 3(xiv) — Internal Audit System: Requires reporting on whether the company has an internal audit system commensurate with its size and nature of business, and whether internal audit reports were considered by the statutory auditor.
CARO Clause 3(xix) — Material Uncertainty on Liabilities: Requires the auditor to state whether, based on financial ratios, ageing and expected cash flows, material uncertainty exists about the company's capability to meet its liabilities as they fall due within one year.
CARO Clause 3(xv) — Non-Cash Transactions with Directors: Requires reporting on whether the company has entered into any non-cash transactions with directors or persons connected to them, and whether the provisions of Section 192 have been complied with.
CARO Clause 3(xvi) — RBI Registration: Requires reporting on whether the company is required to be registered under Section 45-IA of the RBI Act, and if conducting NBFC-type activities without such registration.
CARO Clause 3(xvii) — Cash Losses: Requires reporting on whether the company has incurred cash losses in the current and immediately preceding financial year, and the amount involved.
CARO Clause 3(xviii) — Resignation of Statutory Auditors: Requires the incoming auditor to report whether there has been any resignation of the statutory auditors during the year, and if so, whether they have taken into consideration the issues raised by the outgoing auditor.
CARO Clause 3(xx) — CSR Spending: Requires reporting on whether the company has transferred unspent CSR amounts to the specified fund within the required timeline, for companies covered under Section 135.
CARO Clause 3(xxi) — Qualifications in Subsidiary Reports: Requires the auditor to report on whether there are any qualifications or adverse remarks in the CARO reports of any subsidiary, associate or joint venture included in the consolidated financial statements.
Cash Credit: A short-term working capital facility against the security of stock and receivables, typically repayable on demand, distinct from a term loan.
Chart of Accounts: The structured list of every ledger account a company uses to classify its financial transactions, forming the backbone that the trial balance and financial statements are built from.
Common Control Entities: Entities ultimately controlled by the same person or group, even where no direct shareholding link exists between them — a frequent source of undisclosed related-party relationships.
Compensating Control: A control that reduces the risk of an existing control weakness to an acceptable level, without eliminating the weakness itself.
Componentization: Depreciating significant parts of an asset separately when they have different useful lives — required under Schedule II of the Companies Act for assets with materially different component lives.
Composite Supply: A supply of two or more goods or services naturally bundled and supplied together in the ordinary course of business, taxed at the rate applicable to the principal supply.
Composition Scheme: A simplified GST scheme for small taxpayers below a specified turnover threshold, paying tax at a fixed, lower rate on turnover and generally unable to claim input tax credit.
Computer-Assisted Audit Techniques (CAAT): Software-based techniques used to extract, analyse and test data directly from a client's systems, rather than relying solely on manual inspection.
Consignment Stock: Goods held by one party (the consignee) but still owned by another (the consignor) until sold — a frequent source of inventory cut-off and ownership errors.
Continuous Auditing: Performing audit procedures on an ongoing basis throughout the period rather than only at year end, enabled by systems that make data available in near real time.
Contractor vs. Employee Classification: The distinction between a genuine independent contractor and a worker who is, in substance, an employee — carrying real consequences for PF, ESI, gratuity and labour-law compliance regardless of the label used in a contract.
Control Environment: The overall tone an organisation sets about the importance of internal control — management's attitude, integrity and competence — the foundation COSO places under every other control component.
Control Risk: The risk that a misstatement could occur in an assertion and not be prevented, or detected and corrected, on a timely basis by the entity's internal control.
Corporate Social Responsibility (CSR) Spending: The mandatory CSR expenditure required under Section 135 for companies meeting specified net worth, turnover or profit thresholds, with unspent amounts subject to specific transfer and disclosure requirements.
COSO Framework: A widely used internal control framework (Committee of Sponsoring Organizations of the Treadway Commission) describing five components of effective internal control, commonly used as the basis for IFC assessments in India.
Cost Audit: An audit of a company's cost records, required for specified classes of companies engaged in regulated or strategic sectors, reported separately from the statutory financial audit.
Cut-off Testing: Verifying that transactions are recorded in the period they actually occurred in, not an adjacent one — the classic question for revenue, purchases and inventory around a year end.
Data Analytics in Audit: Using analysis of large datasets — often the full population rather than a sample — to identify patterns, outliers and anomalies that direct audit attention.
Debt Service Coverage Ratio (DSCR): A ratio measuring a company's ability to service its debt obligations from operating cash flow — frequently a loan covenant a lender monitors.
Debtors Confirmation: A direct request to a customer to confirm their outstanding balance, used as external evidence for receivables.
Detection Risk: The risk that the procedures performed by the auditor will not detect a misstatement that exists and could be material.
Director's Responsibility Statement: A statement included in the Board's Report under Section 134, in which the directors affirm their responsibility for the financial statements, internal financial controls, and compliance with applicable laws.
Disclaimer of Opinion: Issued when the auditor is unable to obtain sufficient appropriate evidence and the possible effects could be both material and pervasive — the auditor does not express an opinion at all.
Duplicate Invoice: The same purchase invoice entered into the books more than once, whether through re-entry, a restored backup, or two near-identical vendor records.
E-Invoice: An invoice authenticated electronically through the GST Invoice Registration Portal (IRP), generating a unique Invoice Reference Number (IRN), mandatory for specified turnover thresholds.
E-Way Bill: An electronic document required for the movement of goods above a specified value, generated on the GST portal before the goods are transported.
Emphasis of Matter: A paragraph in the auditor's report drawing attention to a matter already appropriately presented or disclosed, without modifying the opinion.
Employee State Insurance (ESI): A social security scheme providing medical and cash benefits to employees below a specified wage threshold, funded by employer and employee contributions.
Engagement Letter: The letter agreed with the client before an audit starts, setting out its scope, management's responsibilities and the auditor's responsibilities. Required by SA 210.
Engagement Quality Control Review (EQCR): An objective evaluation of significant judgments and conclusions made in an engagement, performed by a reviewer not otherwise involved in the engagement, before the report is issued.
Entity-Level Controls: Controls operating at the level of the organisation as a whole rather than within a specific process — the control environment, risk assessment process, and board/audit committee oversight.
Exempt Supply: A supply on which no GST is charged and on which the supplier cannot claim input tax credit for inputs used to make it.
Expected Credit Loss (ECL): A forward-looking provisioning model under Ind AS 109 that estimates credit losses on receivables and other financial assets, rather than waiting for a loss to be incurred.
FIFO (First-In, First-Out): An inventory costing method that assumes the oldest stock on hand is sold first, so the earliest costs flow to cost of goods sold.
Fixed Asset Register (FAR): The detailed record of every fixed asset a company owns — cost, location, accumulated depreciation, useful life — that should tie to the general ledger balance.
Fixed Deposit (FD): A deposit placed with a bank for a fixed term at a fixed interest rate — verified in audit by confirmation from the bank, not merely the client's own record.
Foreign Currency Translation: Restating balances denominated in a foreign currency into the reporting currency at the applicable exchange rate, with the resulting gain or loss recognised per the applicable accounting standard.
Form 16 / Form 24Q: Form 16 is the TDS certificate issued to an employee for tax deducted on salary; Form 24Q is the quarterly TDS return an employer files reporting those deductions.
Form 3CD: The detailed statement of particulars required to be furnished under a tax audit, covering a wide range of income-tax-specific disclosures beyond what a statutory audit examines.
Form ADT-1: The form filed with the Registrar of Companies to notify the appointment of a statutory auditor, required within a specified period of the appointment being made.
Fraud Triangle: A model explaining the three conditions typically present when fraud occurs — pressure/incentive, opportunity, and rationalisation — used to guide fraud risk assessment.
Full-Population Testing: Applying a procedure to every transaction in a population rather than a sample — made practical by data analytics, and a different basis for a conclusion than a projected sample result.
General Ledger: The complete set of accounts recording every financial transaction a business enters into, from which the trial balance is extracted.
Going Concern: The assumption that an entity will continue to operate for the foreseeable future, without any intention or necessity of liquidation — the auditor evaluates whether this assumption remains appropriate.
Goods Receipt Note (GRN): A document recording that goods ordered were physically received, used to match a purchase order to the invoice that follows it.
Gratuity: A statutory lump-sum benefit payable to an employee on retirement, resignation after five years' service, or death, computed under the Payment of Gratuity Act and usually recognised using an actuarial valuation.
GST Credit Note / Debit Note: Documents issued to adjust a previously issued GST invoice — a credit note to reduce the taxable value or tax, a debit note to increase it.
GSTIN: The 15-character Goods and Services Tax Identification Number assigned to every GST-registered entity in India.
GSTR-1: The monthly or quarterly GST return on which a registered taxpayer reports its outward supplies (sales).
GSTR-2B: An auto-generated statement showing the input tax credit available to a taxpayer based on what its suppliers have reported, used as the reference point for ITC reconciliation.
GSTR-3B: The monthly summary GST return on which a taxpayer declares its tax liability and claims input tax credit.
GSTR-9: The annual GST return consolidating the information furnished in the monthly or quarterly returns filed during the financial year.
GSTR-9C: A reconciliation statement between the annual return (GSTR-9) and the taxpayer's audited financial statements, applicable above a specified turnover threshold.
Hedge Accounting: An accounting treatment aligning the recognition of gains and losses on a hedging instrument with the item it hedges, subject to specific documentation and effectiveness criteria.
HSN / SAC Code: Harmonised System of Nomenclature (for goods) and Services Accounting Code (for services) — the classification codes required on GST invoices and returns.
ICFR / IFC (Internal Financial Controls): The controls a company has in place over its financial reporting process. The statutory auditor is required to report on their operating effectiveness for specified companies.
Ind AS: Indian Accounting Standards — the accounting framework converged with IFRS, applicable to companies above specified thresholds; smaller companies continue to apply the older Accounting Standards (AS).
Ind AS 1: Governs the presentation of financial statements — their structure and minimum content requirements.
Ind AS 10: Governs events after the reporting period, distinguishing those that adjust the financial statements from those that only require disclosure.
Ind AS 105: Governs non-current assets held for sale and discontinued operations, including the specific measurement and presentation rules that apply once an asset meets the held-for-sale criteria.
Ind AS 108: Governs operating segment disclosures, requiring an entity to disclose information to help users evaluate the business activities it engages in and the economic environments it operates in.
Ind AS 109: Governs financial instruments, including the expected credit loss model for impairment of financial assets.
Ind AS 113: Governs fair value measurement — a single framework for how fair value is defined and measured across every standard that requires or permits it.
Ind AS 115: Governs revenue from contracts with customers, using a five-step model to determine when and how much revenue to recognise.
Ind AS 116: Governs leases, requiring most leases to be recognised on the lessee's balance sheet as a right-of-use asset and a lease liability.
Ind AS 12: Governs income taxes, including the recognition of deferred tax assets and liabilities.
Ind AS 16: Governs property, plant and equipment — recognition, subsequent measurement, depreciation and derecognition.
Ind AS 19: Governs employee benefits, including the actuarial valuation basis for defined benefit obligations such as gratuity.
Ind AS 2: Governs inventories — the costs to include in valuing them, and the requirement to carry them at the lower of cost and net realisable value.
Ind AS 20: Governs the accounting for government grants, including the timing and basis on which such grants are recognised in profit or loss.
Ind AS 21: Governs the effects of changes in foreign exchange rates, including how to translate transactions and balances denominated in a foreign currency.
Ind AS 23: Governs the capitalisation of borrowing costs directly attributable to the acquisition or construction of a qualifying asset.
Ind AS 24: Governs related party disclosures — identifying related parties and the information required about transactions and outstanding balances with them.
Ind AS 33: Governs the computation and disclosure of earnings per share (EPS), both basic and diluted.
Ind AS 34: Governs interim financial reporting — the minimum content and principles for financial statements covering a period shorter than a full financial year.
Ind AS 36: Governs impairment of assets — when and how to test whether an asset's carrying amount exceeds its recoverable amount.
Ind AS 37: Governs provisions, contingent liabilities and contingent assets, including the recognition criteria that distinguish a provision from a mere disclosure.
Ind AS 38: Governs intangible assets, including the criteria for recognising internally generated intangibles such as capitalised development costs.
Ind AS 40: Governs investment property — property held to earn rentals or for capital appreciation, measured and disclosed separately from owner-occupied property.
Ind AS 7: Governs the statement of cash flows, classifying cash flows into operating, investing and financing activities.
Ind AS 8: Governs accounting policies, changes in accounting estimates, and the correction of prior-period errors.
Independent Director: A director with no material pecuniary relationship with the company beyond sitting fees, required on the boards of specified classes of companies to bring an independent perspective.
Inherent Risk: The susceptibility of an assertion to misstatement before considering any related controls — some balances (estimates, related-party transactions) are inherently riskier than others.
Input Service Distributor (ISD): An office of a business that receives invoices for input services and distributes the available credit to its other registered units.
Input Tax Credit (ITC): The GST paid on purchases that a registered business can set off against the GST it owes on its own sales.
IT General Controls (ITGC): Controls over the IT environment supporting financial reporting applications — access management, change management, and IT operations — distinct from controls within a specific business process.
Joint Audit: An engagement where two or more audit firms are jointly responsible for the same audit, each taking responsibility for the work they perform and jointly for the report.
Key Audit Matters (KAM): Matters that, in the auditor's professional judgment, were of most significance in the audit of the current period's financial statements, communicated under SA 701.
Key Control: A control that, if it failed, would be unlikely to be detected by another control in time to prevent a material error — the controls an IFC testing plan should prioritise.
Leave Encashment: Payment made to an employee for unused earned leave, either on separation or periodically — like gratuity, typically provided for on an actuarial basis for larger employers.
Letter of Credit: A bank's conditional undertaking to pay a seller on a buyer's behalf once specified documents are presented, commonly used in import/export trade.
Letter of Undertaking (LUT): A document filed by an exporter to supply goods or services without payment of integrated tax, as an alternative to paying IGST and claiming a refund.
Limited Review: A review of interim financial results, less in scope than a full audit, typically performed on a listed company's quarterly results.
Loan Covenant: A condition attached to a borrowing that the borrower must comply with, breach of which can trigger default or accelerated repayment regardless of whether payments are current.
Management Representation Letter: A letter from management confirming, in writing, representations made to the auditor during the audit — required under SA 580, not a substitute for other evidence.
Materiality: The threshold above which a misstatement could reasonably be expected to influence the economic decisions of someone relying on the financial statements. Set by the auditor at the planning stage.
Mixed Supply: Two or more individual supplies made together for a single price that are not naturally bundled, taxed at the rate of the item attracting the highest tax.
MSME / Udyam Disclosure: The requirement to disclose amounts due to micro and small enterprise suppliers, including interest on delayed payment beyond 45 days, identified by their Udyam registration status.
Net Realisable Value (NRV): The estimated selling price of inventory in the ordinary course of business, less estimated costs of completion and sale — the ceiling against which cost is compared under Ind AS 2.
Net Worth (Companies Act): Defined under Section 2(57) as the aggregate of paid-up share capital and reserves created out of profit, less accumulated losses and write-back of depreciation — a threshold used across several Companies Act provisions.
Other Matter Paragraph: A paragraph referring to a matter other than those presented in the financial statements, relevant to users' understanding of the audit, the auditor's responsibilities, or the report.
Payroll Fraud: Manipulation of the payroll process for personal gain — ghost employees, inflated hours, unauthorised rate changes — tested for through red-flag analytics rather than vouching alone.
Peer Review (ICAI): A review of a chartered accountant firm's attest function by another practising member, mandated by ICAI for firms conducting statutory audits of specified entities.
Performance Materiality: An amount set below overall materiality, to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
Perpetual Inventory System: An inventory record that updates continuously as transactions occur, as distinct from a periodic system that only determines quantities at a physical count.
Petty Cash: A small cash fund held for minor day-to-day expenses, reconciled and replenished periodically — a disproportionately common source of control weakness given the small amounts involved.
Physical Verification: Directly inspecting an asset (inventory, fixed assets, cash) rather than relying solely on the book record, to confirm it exists and is in the condition and location the records claim.
Place of Supply: The location that determines whether a supply is intra-state or inter-state under GST, and therefore which tax (CGST/SGST or IGST) applies.
Professional Judgment: The application of relevant training, knowledge and experience to make informed decisions about the courses of action appropriate given the circumstances of the engagement.
Professional Skepticism: An attitude that includes a questioning mind and a critical assessment of audit evidence, rather than assuming management is either honest or dishonest.
Professional Tax: A state-level tax on income from employment or a profession, deducted by the employer and remitted on the employee's behalf in the states where it applies.
Provident Fund (PF): A retirement savings scheme under the Employees' Provident Funds Act, requiring matched employer and employee contributions on specified wage components for covered establishments.
Purchase Register: The client's listing of all purchase transactions for a period, used as the population for purchase and accounts-payable testing.
QRMP Scheme: Quarterly Return Monthly Payment — a GST compliance scheme allowing small taxpayers to file returns quarterly while still paying tax monthly.
Qualified Opinion: An opinion stating that, except for a specific identified matter, the financial statements give a true and fair view.
Related Party Transaction: A transaction between the company and a party connected to it by ownership, control or significant influence — subject to specific identification, approval and disclosure requirements.
Residual Value: The estimated amount an entity would obtain from disposing of an asset at the end of its useful life, after deducting disposal costs.
Reverse Charge Mechanism (RCM): A GST mechanism where the recipient of specified goods or services, rather than the supplier, is liable to pay the tax directly to the government.
Risk Control Matrix (RCM): A working document mapping identified risks to the controls meant to address them, the frequency of each control, and the evidence that it operated — not to be confused with the GST Reverse Charge Mechanism, which shares the same acronym.
Rotation of Auditors: The Companies Act requirement that specified classes of companies rotate their statutory auditor (individual or firm) after a maximum tenure, to preserve independence.
SA 200: The Standard setting out the overall objectives of an independent auditor and the nature of an audit conducted under the Standards on Auditing.
SA 210: Governs the terms of an audit engagement — the basis for the engagement letter agreed with the client before work begins.
SA 230: The Standard on Auditing governing audit documentation — what must be in the file, in enough detail that an experienced auditor with no prior connection to the engagement could understand the work performed.
SA 240: The Standard on the auditor's responsibilities relating to fraud in an audit of financial statements, including maintaining professional skepticism throughout.
SA 250: Governs the auditor's consideration of laws and regulations in an audit, distinguishing those with a direct effect on the financial statements from others.
SA 300: The Standard on planning an audit of financial statements — establishing the overall strategy and a detailed plan before fieldwork starts.
SA 315: Requires the auditor to identify and assess the risks of material misstatement through understanding the entity, its environment, and its internal control.
SA 320: Governs materiality in planning and performing an audit — the threshold set at the planning stage that drives the nature and extent of procedures.
SA 330: The auditor's responses to assessed risks — linking the procedures actually performed back to the risks identified under SA 315.
SA 500: The general Standard on audit evidence — what makes evidence sufficient and appropriate.
SA 501: Specific considerations for particular items of evidence, most notably attendance at physical inventory counting and inquiry regarding litigation and claims.
SA 505: Governs external confirmations — direct requests to a third party (a bank, a customer, a lender) to confirm information used as audit evidence.
SA 520: Analytical procedures — evaluating financial information through plausible relationships among data, both financial and non-financial.
SA 530: The Standard on audit sampling — selecting less than 100% of a population and projecting the result, as distinct from full-population testing.
SA 540: Governs auditing accounting estimates, including fair value estimates, and the related disclosures — an area inherently more judgmental than a verifiable transaction.
SA 550: The Standard specifically addressing related parties — identification, the risk of undisclosed relationships, and the related disclosure requirements.
SA 560: Subsequent events — the auditor's responsibility for events occurring between the balance sheet date and the date of the audit report.
SA 570: Going concern — the auditor's responsibility to evaluate whether substantial doubt exists about an entity's ability to continue operating for the foreseeable future.
SA 580: Requires the auditor to obtain written representations from management on matters relevant to the audit, via a management representation letter.
SA 600: Governs an audit of group financial statements, including the work of component auditors of subsidiaries and divisions.
SA 610: Sets out when and how a statutory auditor may use the work of an entity's internal audit function as audit evidence.
SA 620: Governs using the work of an auditor's expert — someone with expertise outside accounting and auditing, such as a valuer or an actuary.
SA 700: Governs forming an opinion and reporting on financial statements — the basis for the standard unmodified audit report.
SA 701: Requires communicating key audit matters (KAM) in the auditor's report for listed entities — the matters of most significance in the audit.
SA 705: Governs modifications to the opinion in the independent auditor's report — qualified, adverse, or a disclaimer of opinion.
SA 706: Governs emphasis of matter and other matter paragraphs in the auditor's report, used to draw attention to something without modifying the opinion.
Secretarial Audit (Form MR-3): An audit of a company's compliance with applicable corporate laws, conducted by a practising company secretary and reported in Form MR-3, required for specified classes of companies.
Section 129 (Companies Act): Requires financial statements to give a true and fair view and comply with the applicable accounting standards.
Section 134 (Companies Act): Governs the Board's Report, including the disclosures the board must make alongside the financial statements each year.
Section 139 (Companies Act): Governs the appointment of auditors, including the process, tenure, and the rotation requirement for specified companies.
Section 141 (Companies Act): Sets out the eligibility and disqualification criteria for a person to be appointed as a company's auditor.
Section 143 (Companies Act): Sets out the powers and duties of an auditor, including the matters that must be reported on and the right of access to the company's books and records at all times.
Section 144 (Companies Act): Prohibits a statutory auditor from rendering specified non-audit services to the company it audits, to preserve independence.
Section 177 (Companies Act): Requires specified companies to constitute an Audit Committee of the board, with defined composition and responsibilities including oversight of the financial reporting process.
Section 185 (Companies Act): Restricts a company from giving loans, guarantees or security to its directors and certain connected persons, subject to defined exceptions.
Section 186 (Companies Act): Governs a company's loans and investments to other companies, and the limits and approvals required beyond specified thresholds.
Section 203 (Companies Act): Requires specified companies to appoint Key Managerial Personnel, including a Managing Director or CEO, a CFO and a Company Secretary.
Segregation of Duties (SoD): A control principle that no single person should be able to both execute and conceal a transaction — for example, the person who creates a vendor master should not also approve payments to it.
Significant Influence: The power to participate in the financial and operating policy decisions of an entity without having control over those policies — one of the tests for whether a party is "related" under Ind AS 24.
Slow-Moving / Obsolete Inventory: Stock that has not moved for an extended period, or that is no longer saleable at its carrying value, usually requiring a provision down to net realisable value.
SOC 1 Report: An independent assurance report on the controls at a service organization (such as a payroll processor) that a client has outsourced a process to, used by the auditor as evidence over that outsourced process.
Standard Costing: A costing method using predetermined (standard) costs for materials, labour and overhead, with variances analysed between standard and actual.
Statutory Audit: The audit a company is legally required to undergo under the Companies Act, resulting in an opinion filed with the regulator and shareholders — as distinct from an internal audit, which reports internally.
Statutory Auditor vs. Internal Auditor: The statutory auditor is independent of the company and reports externally to shareholders on the financial statements; the internal auditor is typically engaged by (or employed within) the company and reports internally on operational and control matters.
Statutory Registers: The registers a company is legally required to maintain under the Companies Act — of members, directors, charges, related party contracts and others — distinct from its accounting books.
Stock Audit: A physical verification and valuation exercise over a company's inventory, often performed by a third party at a bank's request as a condition of working capital finance.
Subsequent Events: Events occurring between the balance sheet date and the date the financial statements are approved, which may require adjustment or disclosure.
Substantive Procedures: Audit procedures designed to detect material misstatements at the assertion level directly — tests of detail and substantive analytical procedures.
Tax Audit (Section 44AB): A mandatory audit under the Income Tax Act for businesses and professionals above specified turnover or receipts thresholds, reported in Form 3CA/3CB and Form 3CD, distinct from the statutory audit under the Companies Act.
TCS under GST: Tax Collected at Source — a GST compliance obligation requiring e-commerce operators to collect tax on the net value of taxable supplies made through their platform.
TDS (Tax Deducted at Source): Income tax deducted at the point a payment is made (salary, contractor fees, rent and more) and deposited with the government on the payee's behalf.
TDS under GST (Section 51): A GST compliance obligation requiring specified categories of deductors (government bodies and others) to deduct tax at source on payments to suppliers above a threshold.
Test of Controls: A procedure to evaluate the operating effectiveness of a control in preventing or detecting material misstatements, as distinct from a substantive procedure on the balance itself.
Those Charged With Governance (TCWG): The person(s) or organisation(s) responsible for overseeing the strategic direction and obligations of an entity, such as its board or audit committee — the audience for the auditor's communications beyond management.
Three-Way Match: Comparing a purchase order, the goods receipt and the supplier invoice against each other before a payment is approved, to confirm what was ordered, received and billed all agree.
Time of Supply: The point at which GST liability arises on a supply, generally the earlier of the invoice date or the date of payment.
Tolerable Misstatement: The maximum misstatement in a population that the auditor is willing to accept, used to determine sample size and evaluate sample results.
Trade Payables Ageing: A breakdown of amounts owed to suppliers by how long they have been outstanding, used to assess liquidity risk and as a required disclosure under Schedule III of the Companies Act.
Transfer Pricing Audit: An examination of international and specified domestic transactions between associated enterprises, to confirm pricing is at arm's length as required under the Income Tax Act.
Trial Balance: A listing of every ledger account and its closing balance, which should sum to zero (total debits equal total credits) and tie to the financial statements before any audit work begins on top of it.
Unmodified Opinion: The audit opinion issued when the financial statements give a true and fair view in all material respects — commonly called a "clean" opinion.
Useful Life: The period over which an asset is expected to be available for use, or the number of production units expected from it — the basis for the depreciation charge.
Variance Analysis: Comparing actual results to a budget or standard, and investigating the difference — in audit, a useful analytical procedure for spotting unusual movements worth explaining.
Vendor Reconciliation: Agreeing the balance a company's books show for a supplier against that supplier's own statement of account, to surface missing invoices, timing differences or disputes.
Vouching: Tracing a recorded transaction back to its underlying source document to verify that it is genuine, properly authorized and correctly recorded.
Walkthrough (Control Walkthrough): Tracing one transaction through a process end to end, confirming at each step that the control the client describes actually happens the way they describe it.
Weighted Average Cost (WAC): An inventory costing method that averages the cost of all units available for sale during a period, rather than tracking specific batches.
Whistleblower Mechanism: A formal channel allowing employees and others to report suspected fraud or misconduct, required for specified classes of companies and audit committees under the Companies Act.
Work-in-Progress (WIP) Valuation: Valuing partially completed production — raw material, labour and overhead incurred so far — a judgment-heavy area in any manufacturing audit.
Working Paper: The document that records the procedure performed, the evidence examined, and the conclusion reached — the primary record of audit work, reviewed and signed off before the file closes.
XBRL Filing: Extensible Business Reporting Language — a structured data format in which specified companies must file their financial statements with the Registrar of Companies, enabling machine-readable comparison across filings.
Zero-Rated Supply: A supply (such as an export) on which GST is charged at 0%, with the supplier still entitled to claim input tax credit — distinct from an exempt supply.

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