An Indian subsidiary must have its financial statements audited each year by an independent Chartered Accountant. Depending on size and activity, it may also need a tax audit, GST audit and internal audit. If your Australian group is listed on the ASX, or has a group-wide control framework, the subsidiary is usually part of your internal controls over financial reporting (ICOFR) scope as well.
← Back to the complete guide: How to Set Up a Subsidiary in India from Australia
Key facts
| Statutory audit | Required for every company; the first Auditor is appointed within 30 days of incorporation |
|---|---|
| Auditor | An independent Chartered Accountant or firm appointed under Section 139 of the Companies Act, 2013; the first Auditor is appointed within 30 days of incorporation |
| Tax audit | Where turnover exceeds ₹1 crore (₹10 crore where cash receipts and payments are each within 5%), reported in Form 26 (previously Forms 3CA/3CB and 3CD) |
| Internal financial controls report | The Auditor reports on internal financial controls (Section 143(3)(i) of the Companies Act, 2013) unless the private company has turnover below ₹50 crore and borrowings below ₹25 crore with no default in filing; the Board must maintain the controls regardless |
| CARO 2020 | Applies to all companies; the exemption is limited to small private companies (revenue up to ₹10 crore and borrowings up to ₹1 crore, among other conditions) that are not a holding or subsidiary of a public company |
| GST audit and reconciliation | As required by current GST law |
| Internal audit | Mandatory under Section 138 of the Companies Act, 2013 for a private company with turnover of ₹200 crore or more or borrowings above ₹100 crore; recommended for Australian group subsidiaries below that |
| Group audit support | Information for the Australian Auditors of the consolidated financials |
The audits an Indian subsidiary may face
| Audit | Purpose | Who |
|---|---|---|
| Statutory audit | Opinion on the annual financial statements under the Companies Act | Independent Chartered Accountant |
| Tax audit | Report to the tax authority on books and tax positions where thresholds apply | Chartered Accountant |
| GST audit and reconciliation | Checks GST returns against books where required | As the GST law prescribes |
| Transfer pricing certificate | Accountant's report in Form 48 (previously Form 3CEB) | Chartered Accountant |
| Internal audit | Independent review of processes and controls | Internal or outsourced |
| Group reporting audit | Reporting package or review for the Australian parent's Auditors | Local or group Auditor |
The statutory audit step by step
- Appoint the Auditor and file the appointment with the Registrar.
- Close the books and prepare the financial statements under Indian accounting standards.
- Auditor reviews, raises queries and finalises the report.
- Board approves the accounts and the AGM adopts them.
- File Form AOC-4 and Form MGT-7 with the Registrar.
Indian subsidiaries report under Indian accounting standards (Ind AS or the applicable standards). Your Australian group consolidates under AASB 10 and translates the Indian accounts from rupees to Australian dollars, so it may need an Australian Accounting Standards (AASB) or IFRS reporting package. We prepare it from the Indian books, with the Indian year ending on 31 March bridged to your 30 June year end.
Internal controls over financial reporting
An ASX-listed parent relies on the controls of its subsidiaries when its CEO and CFO give the declaration on the financial statements (section 295A of the Corporations Act 2001) and when the board reports against the ASX Corporate Governance Principles on risk management. Groups that also report to US investors may add SOX-style testing. For an Indian subsidiary this usually means documenting key processes (payroll, procure-to-pay, revenue, close), testing the controls and fixing gaps. India has its own requirement for internal financial controls to be reported by the Auditor of the company.
- Define the processes and risks in scope with your Australian group controller.
- Segregate duties among preparation, approval and payment.
- Keep evidence of review and approval for key controls.
- Test controls on a schedule and track remediation.
How to prepare for audit
- Maintain monthly closes with reconciled bank, payroll, tax and intercompany balances.
- Keep invoices, contracts and approvals in an organised file.
- Share the audit calendar with your Australian team and Auditors.
- Resolve prior-year points before the next cycle starts.
What this means for an Australian parent
- Tell us early if your group needs a reporting package, answers to group audit instructions from your Australian Auditors, or control testing in India, so the process is built in rather than added in the last month.
- Choose an Auditor for the Indian company that is independent of the team doing the bookkeeping.
Mistakes to avoid
- Appointing the first Auditor late.
- Using the same team for bookkeeping and audit.
- Leaving internal controls undocumented until the Australian Auditors ask.
- Not agreeing the timeline between the Indian and group audits.
How AU Corporate handles this
We support audits and assurance: statutory and tax audit coordination, internal audit, ICOFR and reporting packages for Australian groups.
Related services: Accounting and assurance
Official sources
Rules on this page can be verified at the primary sources: Ministry of Corporate Affairs, Reserve Bank of India, Income Tax Department and the GST portal.
Frequently asked questions
Is audit mandatory for a small Indian subsidiary?
Audit is mandatory for a small Indian subsidiary, because every company must have its financial statements audited each year, whatever its size (Section 139 of the Companies Act, 2013).
When must the first Auditor be appointed?
Within 30 days of incorporation.
Does India require internal controls reporting?
India requires internal controls reporting: the Auditor of the company reports on internal financial controls for most companies (Section 143(3)(i) of the Companies Act, 2013). This is separate from the declaration your Australian parent's CEO and CFO give on its own financial statements.
Can the same firm do the books and the audit?
The same firm cannot do the books and the audit of a company, because the Auditor must be independent of the accounting work.
Can an Australian Accounting Standards (AASB) reporting package be prepared from the Indian books?
An Australian Accounting Standards (AASB) reporting package can be prepared from the Indian books in the format the group needs.
Does the subsidiary need a statutory audit?
An Indian subsidiary needs a statutory audit, because every company must have its accounts audited by a Chartered Accountant appointed as Statutory Auditor, regardless of turnover (Section 139 of the Companies Act, 2013). The audited financial statements are approved at the AGM and filed with the Registrar.
Is a statutory audit mandatory for an Indian subsidiary?
A statutory audit is mandatory for every company in India under Section 139 of the Companies Act, 2013, irrespective of turnover. The first Auditor is appointed by the board within 30 days of incorporation (Section 139(6)), and later Auditors are appointed by shareholders.
What is ICOFR and does the India subsidiary need it?
ICOFR is internal control over financial reporting. Australian listed groups give a CEO and CFO declaration on their accounts (section 295A of the Corporations Act 2001) and report against the ASX Corporate Governance Principles, and groups with US reporting may also follow the Sarbanes-Oxley Act. Material subsidiaries are often brought into scope, so the Indian entity may need documented controls and testing. Indian company law also has its own internal financial controls reporting by the Auditor.
What annual compliance does the subsidiary have?
Statutory audit, an AGM, filing financial statements and the annual return with the Registrar, income tax return and advance tax, GST and Withholding Tax filings, payroll returns, the FLA return to the RBI, and transfer pricing reporting where applicable.
Is an internal audit mandatory for an Indian subsidiary?
An internal audit is mandatory under Section 138 of the Companies Act, 2013 for a private company with turnover of ₹200 crore or more or outstanding borrowings above ₹100 crore from banks or financial institutions. The internal Auditor can be an employee but cannot be the Statutory Auditor.
Does the Auditor have to report on internal financial controls for a small private company?
A private company is exempt from the Auditor's internal financial controls report under Section 143(3)(i) of the Companies Act, 2013 if its turnover is below ₹50 crore and its borrowings are below ₹25 crore, with no default in filing. The Board must still maintain internal financial controls.
Related guides
Compliance Calendar for an Indian Subsidiary: What Is Due and When
The recurring compliance of an Indian subsidiary: monthly, quarterly, annual and event-based filings under company, tax, GST, FEMA and labour law.
Read the guide →Australian Parent Obligations When You Own an Indian Subsidiary
Australian tax reporting that follows when you own an Indian subsidiary: CFC rules, the International Dealings Schedule, foreign income tax offsets, transfer pricing and thin capitalisation. A guide for Australian finance teams.
Read the guide →Thirteen Mistakes Australian Companies Make When Setting Up in India, and How to Avoid Them
The 13 most common and costly mistakes Australian companies make when setting up an Indian subsidiary, and how to avoid each. Includes a pre-filing checklist.
Read the guide →Transfer Pricing in India: A Guide for Australian Parents and Their Indian Subsidiaries
How transfer pricing works for an Indian subsidiary of an Australian company: arm's length pricing, documentation, Form 48, methods, safe harbour and audits.
Read the guide →Sources
Last updated 15 October 2026. General information only, not legal or tax advice. Indian and Australian rules change often; confirm current requirements before acting.