How to Create a Companies Act Audit Programme from a Complete Trial Balance
Prepare a company statutory audit programme using opening balances, gross year transactions and closing balances, including nil accounts, with Companies Act, CARO, IFC and audit-trail planning.
An effective company audit programme starts with the complete trial balance and transaction population, then links assessed risks and assertions to audit procedures and Companies Act reporting. Closing balances alone are insufficient: a loan may be repaid, a director’s account cleared, or large transactions routed through a nil-balance ledger during the year.
1. Establish the company’s audit and reporting requirements
Record company type, listing/group status, business activities, size measures, financial year, branch/component structure and applicable financial reporting framework. Maintain an applicability register with the legal provision, conclusion, supporting facts, source/version and reviewer approval. Do not infer CARO or IFC exemptions from a company name or one TB figure.
| Programme module | Framework to assess | Practical planning action |
|---|---|---|
| Appointment and eligibility | Sections 139–141; engagement and ethics requirements | Check appointment, eligibility, independence, applicable rotation and audit limits; retain the acceptance and engagement file. |
| Books and financial statements | Sections 128, 129 and 133; applicable Schedule III division | Reconcile books to the statements; establish AS/Ind AS applicability and evaluate presentation and disclosures. |
| Statutory reporting and enquiries | Section 143(1), 143(3), 143(9) and 143(10) | Create a reporting checklist and link each relevant conclusion to evidence. Follow the applicable Standards on Auditing. |
| CARO 2020 | Order applicability and individual clauses | Document applicability/exemptions using current rules and company facts. If applicable, prepare a clause-wise workpaper and reporting conclusion. |
| Internal financial controls reporting | Section 143(3)(i), subject to applicable exemptions | Document the separate reporting applicability decision; assess controls relevant to the audit even when a separate IFC report is not required. |
| Audit trail and other Rule 11 matters | Companies (Audit and Auditors) Rules, 2014 | Plan evidence on accounting-software audit trails, litigation, foreseeable losses, IEPF, fund routing and dividends, as applicable. |
| Company-specific transactions | Sections 73–76, 177, 185, 186, 188, 197 and 135, where relevant | Review deposits, approvals, loans/guarantees/investments, related parties, remuneration and CSR against the provisions applicable to the company. |
| Fraud and completion | Section 143(12); applicable reporting rules and SAs | Address fraud/override, evaluate reporting obligations and resolve matters affecting the audit opinion. Consider CAG directions for relevant government companies. |
Use the Companies Act, current rules/notifications and applicable ICAI Standards on Auditing. CARO and separate IFC reporting have distinct applicability tests. Exemption from one does not determine the other or remove the financial-statement audit obligation. The matrix is a planning index, not an exhaustive legal checklist.
2. Request a full movement trial balance
Ask for the company’s entire ledger population without suppressing zero balances, with account codes, opening balances, period debits and credits and closing balances. Specify dates, units, the gross debit/credit convention and whether the TB is before or after adjustments. Obtain the ledger master, general ledger, journal register and adjustment history to validate completeness.
- Opening balances: reconcile to the preceding final accounts and approved carry-forwards; address initial-audit work where relevant.
- Period transactions: retain gross debits and credits, including reversals, contra entries and year-end journals. Do not substitute a net movement column.
- Closing balances: identify both Dr and Cr balances and agree the final adjusted figures to the financial statements.
- Nil accounts: include settled balances, transaction-heavy clearing accounts, inactive accounts and fully dormant masters. Reconcile the export with the ledger master so suppressed accounts are detectable.
3. Recommended trial balance format
Fictional company · FY 2025–26 · INR lakh · unadjusted, before closing profit/loss into reserves. The example shows all amounts, including zeroes. GST movements are illustrative; this is not a GST computation. Add branch, cost centre, prior-year comparator and financial-statement mapping fields when needed.
| Code | Ledger account | Opening balance | Transactions during year | Closing balance | Population flag | |||
|---|---|---|---|---|---|---|---|---|
| Dr | Cr | Dr | Cr | Dr | Cr | |||
| 1001 | Bank | 8.00 | 0.00 | 128.00 | 116.00 | 20.00 | 0.00 | Non-zero closing |
| 1101 | Trade receivables | 16.00 | 0.00 | 106.00 | 98.00 | 24.00 | 0.00 | Non-zero closing |
| 1201 | Inventory | 14.00 | 0.00 | 4.00 | 0.00 | 18.00 | 0.00 | Non-zero closing |
| 1301 | Property and equipment - gross | 30.00 | 0.00 | 0.00 | 0.00 | 30.00 | 0.00 | Non-zero closing |
| 1302 | Accumulated depreciation | 0.00 | 0.00 | 0.00 | 3.00 | 0.00 | 3.00 | Non-zero closing |
| 2001 | Trade payables | 0.00 | 12.00 | 60.00 | 70.00 | 0.00 | 22.00 | Non-zero closing |
| 2101 | Term loan - continuing facility | 0.00 | 10.00 | 10.00 | 20.00 | 0.00 | 20.00 | Non-zero closing |
| 2102 | Old loan - fully repaid | 0.00 | 8.00 | 8.00 | 0.00 | 0.00 | 0.00 | Nil closing; review activity |
| 2201 | GST payable - settled in year | 0.00 | 0.00 | 6.00 | 6.00 | 0.00 | 0.00 | Nil closing; review activity |
| 2301 | Director advance - settled | 0.00 | 0.00 | 5.00 | 5.00 | 0.00 | 0.00 | Nil closing; review activity |
| 2401 | Suspense - cleared | 0.00 | 0.00 | 5.00 | 5.00 | 0.00 | 0.00 | Nil closing; review activity |
| 3001 | Share capital | 0.00 | 30.00 | 0.00 | 0.00 | 0.00 | 30.00 | Non-zero closing |
| 3101 | Opening retained earnings | 0.00 | 8.00 | 0.00 | 0.00 | 0.00 | 8.00 | Non-zero closing |
| 4001 | Sales | 0.00 | 0.00 | 0.00 | 100.00 | 0.00 | 100.00 | Non-zero closing |
| 4101 | Increase in inventories | 0.00 | 0.00 | 0.00 | 4.00 | 0.00 | 4.00 | Non-zero closing |
| 5001 | Purchases | 0.00 | 0.00 | 70.00 | 0.00 | 70.00 | 0.00 | Non-zero closing |
| 5101 | Salaries | 0.00 | 0.00 | 12.00 | 0.00 | 12.00 | 0.00 | Non-zero closing |
| 5201 | Other expenses | 0.00 | 0.00 | 8.00 | 0.00 | 8.00 | 0.00 | Non-zero closing |
| 5301 | Interest expense | 0.00 | 0.00 | 2.00 | 0.00 | 2.00 | 0.00 | Non-zero closing |
| 5401 | Depreciation expense | 0.00 | 0.00 | 3.00 | 0.00 | 3.00 | 0.00 | Non-zero closing |
| 9001 | Dormant bank ledger | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | Fully dormant; retain |
| Totals | 68.00 | 68.00 | 427.00 | 427.00 | 187.00 | 187.00 | All three pairs agree | |
Account equation: Opening Dr − Opening Cr + Period Dr − Period Cr = Closing Dr − Closing Cr. Apply this to every account. Separately check equality of total opening Dr/Cr, total period Dr/Cr and total closing Dr/Cr; agreeing only the last pair is not enough.
Example: Bank = 8 + 128 − 116 = INR 20 lakh Dr. Old loan = −8 + 8 − 0 = nil. GST payable = 0 + 6 − 6 = nil, despite INR 6 lakh on each side. Inventory remains in the opening TB; the illustrative period-end increase is posted separately. The example excludes many adjustments a real company may require.
4. Why nil-balance ledgers remain in the programme
| Nil-balance account | What the TB shows | Audit consideration |
|---|---|---|
| Old loan — fully repaid | Opening Cr 8; period Dr 8; closing 0 | Trace repayment, interest, lender records and security release; assess relevant borrowing and reporting requirements across the year. |
| GST payable — settled | Period Dr 6 and Cr 6; closing 0 | Reconcile gross movements to returns and payments; examine disputes, delayed payments and misclassification rather than concluding compliance from nil. |
| Director advance — settled | Period Dr 5 and Cr 5; closing 0 | Understand the relationship and substance, approvals and terms; assess Sections 185/186 and disclosure/reporting applicability based on facts. |
| Suspense — cleared | Period Dr 5 and Cr 5; closing 0 | Inspect origins, clearance entries and evidence for the final classification; investigate unsupported or circular entries. |
| Dormant bank ledger | Opening, movements and closing all 0 | Determine whether the account exists, is closed or is an unused master; consider undisclosed charges, transactions and the completeness of the bank-account population. |
Keep these accounts visible for risk assessment. Tailor the extent of work to the facts; retaining an account does not automatically require testing every transaction. Also investigate zero-net-value transactions, related-party movements, credit notes/reversals and accounts closed before year-end.
5. Validate, map and assess risk before designing tests
- Record the source export, version, extraction date, entity, period and units; obtain evidence that the population is complete.
- Check duplicate/missing codes, roll-forward errors, unusual Dr/Cr signs, backdated or post-extraction changes and opening-balance differences.
- Reconcile period turnover to the ledger/journal export. Document how migration balances and authorised adjustments are treated.
- Map accounts to financial-statement lines, disclosures, audit areas and assertions. Resolve ambiguous names through the ledger and documents.
- Consider quantitative and qualitative risks, fraud/override and transactions outside the ordinary course. A small or nil closing balance may still be relevant.
- Document approved materiality, performance materiality and any specific lower materiality. Select benchmarks and sampling methods with reasons; do not impose one standard percentage or sample count on every company.
Use SA 300 for planning, with the relevant risk-assessment, materiality, response and sampling standards. AI may propose mappings or procedures; the auditor approves them and evaluates the evidence.
6. Build account-level audit procedures
Expand this starting matrix for the company’s activities and applicable reporting framework. Add the opening balances and gross turnover as risk inputs, not just the closing balance.
| Audit area / ID | Assertions to consider | Risk hypothesis | Suggested procedures to tailor | Evidence to request |
|---|---|---|---|---|
| A01 · Cash / bank | Existence, rights, completeness | Unrecorded accounts or unreconciled items | Obtain the complete account list; reconcile ledger to statements; seek confirmations under auditor control where appropriate; investigate old reconciling items and transfers around year-end. | Statements, bank reconciliations, confirmations, facility and lien details |
| A02 · Receivables | Existence, valuation, cut-off | Overstated balances or recoverability concerns | Reconcile ageing to the TB; design confirmations and alternatives; inspect subsequent receipts, credit notes, disputes and the allowance assessment. Test revenue cut-off separately. | Customer ageing, invoices, dispatch/service evidence, collections and disputes |
| A03 · Inventory | Existence, condition, valuation, completeness | Missing quantities, obsolete stock or incorrect costing | Plan attendance at physical counting where required; test counts and cut-off; reconcile quantities to records and evaluate cost and net realisable value. Address third-party stock. | Count instructions, stock records, costing, sales after year-end, third-party evidence |
| A04 · Property / equipment | Existence, rights, valuation, classification | Capitalised expenses, missing assets or wrong depreciation | Reconcile the register; inspect selected additions and ownership evidence; evaluate capitalisation, disposals, useful lives, depreciation and impairment indicators. | Asset register, invoices, title/lease records, disposal and impairment support |
| A05 · Payables / expenses | Completeness, cut-off, accuracy | Unrecorded liabilities or expenses in the wrong period | Search subsequent payments and invoices; inspect unmatched receipts, supplier statements and accruals. A small closing balance is not a reason to omit completeness testing. | Supplier ageing, payments after year-end, goods receipts, invoices and accrual schedules |
| A06 · Loans / capital | Completeness, rights and obligations, presentation | Undisclosed security, covenants or related parties | Read agreements, obtain relevant confirmations, recompute interest, review repayment classification and covenants, and investigate the source and terms of funding. | Agreements, confirmations, security documents, minutes and party relationships |
| A07 · Revenue | Occurrence, accuracy, cut-off | Premature or fictitious revenue; management override | Understand revenue streams and the fraud-risk assessment; inspect contracts, dispatch/acceptance evidence and credit notes; test cut-off and unusual manual entries. | Contracts, invoices, delivery/acceptance records, journals and credit notes |
| A08 · Statutory balances | Completeness, accuracy, presentation | Unreconciled GST/TDS or undisclosed demands | Reconcile ledgers to returns, challans and portal records; investigate notices and disputes. Establish entity-specific applicability before designing compliance tests. | Returns, challans, portal reconciliations, notices and legal/tax advice |
| A09 · Related parties / journals | Completeness, occurrence, disclosure | Undisclosed relationships or non-routine transactions | Obtain relationship declarations; inspect minutes and ledgers; test unusual journals, round sums and year-end entries using documented criteria and evidence. | Declarations, ownership information, minutes, journal data and approvals |
| A10 · Whole financial statements | Completeness, valuation, presentation | Omitted disclosures, contingencies or going-concern issues | Review commitments, legal matters, estimates, subsequent events and going concern; tie the final adjusted TB to the financial statements and disclosure schedules. | Minutes, legal correspondence, forecasts, adjustments and disclosure checklist |
7. Add Companies Act reporting workpapers
The programme needs statutory reporting work beyond account testing. For each applicable CARO clause, maintain the company facts, procedures, evidence, exceptions and reporting conclusion, with a reason for any non-applicability. Do not generate boilerplate negative answers from the absence of a ledger balance. See the ICAI CARO guidance.
- Schedule III: plan disclosure work, including ageing, specified ratios, title/ownership matters and other requirements of the applicable division; reconcile notes to supporting records.
- IFC: where separately reportable, plan the relevant controls work and conclusion. Link process understanding and controls testing to financial-statement risks.
- Audit trail: identify software and interfaces maintaining books, and plan checks of operation, changes, tampering and preservation in the relevant period. A software setting or screenshot alone is not evidence of continuous operation. Consult ICAI’s revised 2024 implementation guide.
- Other reporting: include relevant Section 143 enquiries, Rule 11 matters, director-disqualification reporting, fraud obligations and company-specific legal requirements. Consider branch reports and consolidated financial statements where applicable.
8. Make the programme executable and reviewable
Use these columns: Procedure ID; account code/name; opening Dr/Cr; period Dr/Cr; closing Dr/Cr; risk; assertion; applicable provision/SA; planned procedure; nature/timing/extent; population and selection rationale; evidence required; preparer; reviewer; due date; workpaper reference; results; exceptions; conclusion; status.
Example — LOAN-02: Old loan / opening Cr INR 8 lakh / repayment Dr INR 8 lakh / closing nil / risk: incomplete interest, unsupported repayment or continuing security / verify agreement, lender evidence, payment trail, interest and security position / assess applicable borrowing disclosures and CARO reporting / selection and dates [auditor-approved] / owner [name] / reviewer [name] / workpaper [LOAN-02] / status [Not started].
Keep planned work distinct from work performed. “Verified” requires an identifiable population, selection, evidence, result and reviewed conclusion. Record changed procedures and reasons as the audit develops.
9. Reusable AI prompts for the complete TB
Prompt 1 · Validate the complete trial balance
Act as an audit planning assistant for a company statutory audit in India. Input: complete TB with Account code, Account name, Opening Dr, Opening Cr, Period Dr, Period Cr, Closing Dr and Closing Cr. Units: [INR/INR lakh]. Period: [dates]. Reporting framework: [AS/Ind AS]. Retain ALL accounts, including nil-closing accounts, fully settled accounts, inactive accounts and unused masters supplied in the export. First check opening Dr=Cr, period Dr=Cr, closing Dr=Cr, and each account's signed roll-forward. Detect duplicate codes, mixed periods, missing balances, unusual signs and unexplained changes. Do not silently alter data or net period debits against credits. Separate: non-zero closing; nil closing with opening balance or year activity; and fully dormant. Reconcile the ledger-master population to the export and identify omitted zero-balance ledgers. Distinguish facts, risk hypotheses and missing information. Stop final planning conclusions if integrity checks fail.
Prompt 2 · Draft the Companies Act audit programme
Using the validated full TB, company profile, prior audit file and approved engagement facts, prepare a DRAFT Companies Act, 2013 financial-statement audit programme. Company type/status: [details]. Reporting framework: [details]. CARO applicability: [approved decision or UNRESOLVED]. IFC reporting applicability: [approved decision or UNRESOLVED]. Materiality/performance materiality: [approved values and rationale, or NOT PROVIDED]. For each area show Procedure ID; account code/name; opening Dr/Cr; period Dr/Cr; closing Dr/Cr; relevant assertion; risk and factual trigger; legal/SA reference to verify; nature, timing and extent; population and proposed selection rationale; evidence required; owner; reviewer; due date; workpaper reference; results; exception; conclusion; status. Include applicable Section 143 enquiries/reporting, Schedule III disclosures, CARO clause work, IFC work, Rule 11 and audit-trail work, related-party/loan/deposit matters and off-TB commitments. Nil closing must never by itself cause exclusion. Do not invent company applicability, approved materiality, effective controls, completed work or an audit opinion. Mark unknowns for auditor approval.
Prompt 3 · Challenge the draft before approval
Review the draft company audit programme against the full TB, ledger population, financial statements, legal applicability register and issues log. Find omitted nil-balance accounts, excessive netting, unexplained roll-forward differences, unsupported legal applicability, small but qualitatively important items, missing assertions, unsuitable sampling, absent completeness tests and missing statutory reporting work. Return: issue, affected account/procedure, why it matters, evidence needed, proposed correction and responsible person. For the fully repaid loan, test year activity, interest, security release, end-use and reporting implications. For nil GST/suspense/director accounts, test gross movement and supporting evidence. Do not equate a cleared ledger with satisfactory compliance.
10. Short demonstration and completion checks
- Run the full sample TB through Prompt 1. Confirm that opening, period and closing pairs agree and all five nil-closing accounts remain visible.
- In a disposable copy, omit the repaid loan row. The opening and transaction checks should fail even though the closing TB still balances.
- Restore it. Run Prompt 2 with CARO/IFC applicability and materiality marked “unresolved”. Check that the draft asks for decisions instead of inventing conclusions.
- Use Prompt 3 and the issues register to challenge the programme. Extend it for the company’s actual systems, branches and statutory requirements.
- Tie the original TB, authorised adjustments, final TB, financial statements and disclosure schedules.
- Resolve unexplained roll-forward differences and omitted ledgers, including dormant/closed accounts.
- Review statutory applicability, all required reporting modules, subsequent events and going concern.
- Ensure conclusions are supported, reviewed and consistent with the auditor’s report.
- Use approved AI environments and remove unnecessary client identifiers. AI-generated working papers and legal references need professional verification.
Authoritative references
- Companies Act, 2013 — India Code; read with current MCA rules and notifications applicable to the company and period.
- ICAI Engagement and Quality Control Standards — complete texts, including planning, risk assessment, audit evidence, sampling and reporting.
- ICAI Guidance Note on CARO 2020 (Revised 2022).
- ICAI implementation guide on Rule 11(g) audit-trail reporting (Revised 2024).
Continue with Tally data preparation, GST reconciliation and financial analysis. This is a planning aid for company statutory audits, not a completed programme or assurance conclusion.