Overview: The Audit Manual for Small & Medium Enterprises, FY 2025–2026, 15th Edition is a practical reference manual for statutory audits. It brings together audit planning, working papers, engagement documentation, audit reporting formats and important compliance requirements applicable to companies and non-corporate entities.
The manual specifically incorporates Audit Trail reporting, CARO 2020, Schedule III requirements, Internal Financial Controls, Management Representation and Board’s Report formats.
- Key Changes and Regulatory Requirements
- Major Changes Covered
- Applicability of Accounting Standards
- Companies
- Non-Corporate Entities
- Audit Planning and Documentation
- Format of Audit Program
- Audit Working Papers
- Engagement and Appointment Documentation
- Engagement Letter
- Appointment and Communication Letters
- Audit Report Formats
- Corporate and Non-Corporate Entities
- Auditor’s Responsibilities
- CARO 2020
- Standard Unqualified Version
- Schedule III Requirements
- Summarised Checklist
- Detailed Requirements
- Internal Financial Controls
- Reporting Format
- Management Representation and Board’s Report
- Management Representation Letter
- Board’s Report
- Overall Purpose
Key Changes and Regulatory Requirements
Major Changes Covered
The manual highlights several important developments, including:
- New format of CARO 2020, applicable from 1 April 2021.
- Major changes in Schedule III, applicable from 1 April 2021.
- Mandatory quoting of UDIN (ICAI).
- Applicable dates for UDIN requirements relating to certificates, GST and tax audit reports, and other audit, assurance and attestation functions.
- Changes in Tax Audit Form 3CD.
- Simplified Board’s Report requirements for Small Companies and One Person Companies.
- Changes relating to MGT-9 and reporting of Internal Financial Controls.
Applicability of Accounting Standards
Companies
The manual provides guidance on the applicability of Accounting Standards to companies, including the relevant classification and regulatory requirements.
Non-Corporate Entities
A separate section addresses the applicability of Accounting Standards to non-corporate entities, enabling auditors to determine the standards relevant to different categories of entities. The Index identifies this as a dedicated section of the manual.
Audit Planning and Documentation
Format of Audit Program
The Audit Program provides a structured framework for planning and conducting an audit. It captures entity details, business profile, audit team, commencement and finalisation dates, basic financial information, accounting-standard applicability, statutory registrations, ownership details and other relevant information. It also includes a comprehensive checklist covering constitutional documents, auditor appointment, licences, subsidiaries, related parties and applicability of CARO.
Audit Working Papers
The manual distinguishes between Current File and Permanent File documentation.
The Permanent File may contain constitutional documents, business history, ownership and management structure, industry information, products, suppliers, customers, personnel, historical financial statements, internal controls, accounting systems, EDP systems, agreements, title deeds, minutes, group structure, professional advisers, bankers and other information of a permanent nature.
Engagement and Appointment Documentation
Engagement Letter
The engagement letter confirms the auditor’s acceptance and understanding of the audit. It covers the objective and scope of the audit, applicable auditing and accounting standards, reasonable assurance, management responsibilities, accounting policies, internal controls, fraud considerations, access to records and cooperation from management.
Appointment and Communication Letters
The manual provides formats for:
- Auditor appointment and ratification.
- New auditor appointment.
- Tax audit appointment under Section 44AB.
- Communication with the previous auditor.
- Consent and certificate of auditor under the Companies Act, 2013.
Audit Report Formats
Corporate and Non-Corporate Entities
The manual provides standard audit report formats for companies as well as non-corporate entities. The non-corporate formats cover both a fair presentation framework and a general purpose compliance framework.
Auditor’s Responsibilities
The audit report framework emphasises obtaining reasonable assurance, assessing risks of material misstatement, obtaining sufficient and appropriate audit evidence, understanding relevant internal controls, evaluating accounting policies and estimates, and considering going concern. It also addresses communication with those charged with governance and auditor independence.
CARO 2020
Standard Unqualified Version
A substantial section is devoted to CARO 2020, including the standard unqualified reporting format applicable from 1 April 2021. The reporting covers matters such as Property, Plant and Equipment, Intangible Assets and other specified areas requiring auditor reporting.
Schedule III Requirements
Summarised Checklist
The manual provides a summarised checklist of the changes introduced in Schedule III, helping auditors review the required disclosures and presentation matters.
Detailed Requirements
A detailed section further explains the Schedule III changes and provides a practical framework for audit and financial-statement review.
Internal Financial Controls
Reporting Format
The manual contains a format for reporting on Internal Financial Controls over Financial Reporting. It sets out management’s responsibility for establishing and maintaining adequate controls and the auditor’s responsibility for expressing an opinion based on audit procedures.
The audit procedures include understanding internal financial controls, assessing risks of material weakness, and testing and evaluating the design and operating effectiveness of controls.
Management Representation and Board’s Report
Management Representation Letter
The manual includes a comprehensive format for the Management Representation Letter, forming part of the audit documentation and supporting the representations obtained from management.
Board’s Report
Separate formats are provided for the standard Board’s Report and the Board’s Report for Small Companies and One Person Companies, reflecting the applicable simplified requirements.
Overall Purpose
The Audit Manual functions as a practical audit reference and documentation framework for Small and Medium Enterprises. It brings together the major stages of an audit—from planning and working papers to engagement documentation, audit reporting and statutory compliance—while providing ready-to-use formats and checklists.
Its principal focus is to help auditors maintain consistent documentation, appropriate audit procedures, compliance with applicable standards and statutory requirements, and properly structured reporting for FY 2025–2026.
Downloads
Audit Manual 2025-2026 – Small & Medium Enterprises
Audit Manual 2025-2026 – Small & Medium Enterprises – Editable Formats
