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Statutory auditors apply SA 320 performance materiality (typically 50-75% of 5% of PBT or 0.5% revenue benchmark) across five mandatory reconciliation areas: bank (SA 505 confirmations via DBCP), party balances, intercompany, statutory dues (TDS plus GST plus PF plus ESI), and inventory to GL. CARO 2020 Clause 3(ii)(b) adds quarterly BRS-to-bank-filed-returns reconciliation above ₹5 crore working capital.
The year-end reconciliation pack is pre-built in the structure the auditor expects: BRS for every bank account, Form 26AS three-way match for TDS receivable, GSTR-1 to GSTR-3B to GSTR-9 for output tax, GSTR-2B to ITC for input tax, Rule 42/43 reversal schedule, statutory-dues aging, and intercompany confirmation matrix. Each item carries performance-materiality flagging for auditor sampling.
SA 320 performance-materiality threshold, SA 505 external confirmation tracker with DBCP integration where supported, CARO 2020 Clause 3(ii)(b) quarterly working-capital return matcher, and SA 330 risk-based testing rules.
Audit-ready reconciliation pack for 32 standard schedules, SA 505 external confirmation file, CARO 2020 working-capital reconciliation trail, and qualification-threshold alerts for items above performance materiality.
A ₹700 crore turnover distribution company received the engagement letter from its statutory auditor on 5 April. The auditor requested 32 reconciliation schedules by 20 April: bank BRS for 7 accounts, party confirmations for 180 debtors and 240 creditors, intercompany balances with 6 group entities, TDS receivable against Form 26AS, GST ITC reconciliation for 12 months, and 7 statutory due reconciliations. The finance team had 15 working days. This guide is the checklist that tells finance teams what each of those schedules needs to contain.
The Statutory Audit Reconciliation Scope
Statutory audit under the Companies Act, 2013 requires the auditor to form an opinion on whether financial statements give a true and fair view under the applicable financial reporting framework (Ind AS or Indian GAAP). Reconciliation is the evidence base for most significant account balances. Under SA 330 (The Auditor’s Responses to Assessed Risks), the auditor designs substantive procedures proportionate to the assessed risk of material misstatement.
Reconciliation work covers five mandatory areas for every statutory audit: bank accounts, party balances (debtors and creditors), intercompany balances, statutory dues (TDS, GST, PF, ESI, professional tax, advance tax), and inventory to GL (for entities holding inventory). For companies above the CARO 2020 working capital threshold of ₹5 crore, quarterly BRS reconciliation with bank-filed returns is an additional reporting item under Clause 3(ii)(b).
The Statutory Audit Reconciliation Checklist
Bank Reconciliation
The auditor requests all BRS for the year, selects 3 to 4 months for re-performance, verifies bank balance confirmations received under SA 505, and reviews aging of unreconciled items. For companies on the Digital Bank Confirmation Portal (DBCP) — covering Canara Bank, Punjab National Bank, Bank of Maharashtra, and UCO Bank since July 2025 — confirmations are digitally signed and received within 7 to 10 days.
Party Balance Confirmation
Debtor and creditor confirmations are sent under SA 505 (positive confirmation for debtors above materiality, negative for others). Non-response rates above 20% trigger alternative procedures: subsequent receipts testing for debtors, subsequent payment testing for creditors. Reconciliation of differences (payments in transit, disputed amounts, credit notes not yet issued) is documented for each confirmed balance.
Intercompany Reconciliation
Balances with group entities must reconcile at both ends — the debtor entity books a receivable and the creditor entity books a payable of identical amount. Under Ind AS 24 (Related Party Disclosures), intercompany balances are separately disclosed in notes to accounts. Mismatches trigger consolidation elimination errors and are almost always qualified if unresolved.
Statutory Audit Reconciliation Checklist Reference
| Reconciliation Area | Audit Procedure | Evidence Required | Qualification Trigger |
|---|---|---|---|
| Bank reconciliation | Re-perform BRS, verify SA 505 confirmation | Signed BRS, bank confirmation, aging schedule | Items aged over 90 days above materiality |
| Party balances | Direct confirmation under SA 505 | Confirmation letter, reconciliation workpaper | Non-response over 20% plus inadequate alt procedures |
| Intercompany balances | Reconcile both sides of each balance | Confirmation from group CFO, reconciliation workpaper | Any unreconciled variance above performance materiality |
| TDS receivable | Match books to Form 26AS and Form 16A | 26AS download, certificate copies, reconciliation | Writebacks over 2 quarters unsupported |
| GST input credit | Match GSTR-3B ITC to GSTR-2B | GSTR-2B JSON, purchase register, reversal log | ITC claimed without 2B support |
| Statutory dues | Match challan to liability and bank debit | Challan copies, bank debits, liability ledger | Any payment after due date without interest provision |
| Inventory to GL | Cyclic count reconciliation, FAR review | Count sheets, valuation working, GL extract | Variance over 2% of inventory value |
Where the Statutory Audit Finds Reconciliation Gaps in India
Three India-specific reconciliation items generate most audit qualifications: TDS receivable mismatches with Form 26AS (writebacks not provisioned), GST ITC claimed without corresponding GSTR-2B support (leading to Rule 36(4) non-compliance and potential Section 73 demand exposure), and intercompany balances between Indian group entities that were netted off rather than reconciled (violating Ind AS 24 disclosure requirements). Each of these requires a pre-prepared reconciliation pack that the auditor can test rather than rebuild from source.
Under the new Income Tax Act 2025, Form 3CD has been replaced by Form 26, with Clauses 49 to 51 requiring exact counts and monetary amounts of unreported TDS and TCS. The statutory auditor now expects reconciliation to feed directly into tax audit reporting — bank debits for TDS challans must be matched to TDS return entries, and every bank credit from a customer must be verified against TCS collection records where applicable.
Companies with pre-built reconciliation audit trail documentation typically reduce statutory audit field time by 30 to 50% because the auditor can test the existing workpapers rather than reconstruct them. For organisations processing 1,000+ monthly bank transactions, 200+ TDS deductor relationships, or 500+ GST vendor invoices, TransactIG’s reconciliation infrastructure generates the audit-ready packs — BRS, exception logs, aging schedules, Form 26AS matches, GSTR-2B line-level reconciliation — as a standard output. For TDS-heavy audit scopes, TDS reconciliation software eliminates the quarterly-backlog problem that drives most year-end writebacks. The SA framework and Guidance Notes are published by the Institute of Chartered Accountants of India.
The FAQs below address the most common scope, materiality, and timeline questions that come up during engagement planning and audit kick-off.