The Year-End Contract Audit: Fifteen Checks Before You Close the Books

Auditors ask about contingent liabilities, MSE balances, related-party agreements and commitments. Investors ask about change-of-control clauses and expiries. Regulators ask about vendor terms. The answers all live in the contract portfolio, and the year end is the moment to find them before someone else does. This checklist is written for the finance, legal and operations people who share the job. Position as of October 2026.

Completeness

1. Every live contract is in the register. Reconcile the register against the vendor master, the customer master and the lease schedule. Contracts found in inboxes are added, with their executed copies.

2. Every contract in the register has an executed copy with its stamp certificate and signature audit trail. An agreement without a stamp certificate is inadmissible until duty and penalty are paid (section 35, Indian Stamp Act, 1899); regularise the ones that matter.

3. Expired contracts still being performed or paid. List them; renew, re-paper or stop payment.

Payments and tax

4. MSE balances. Identify suppliers registered as micro or small enterprises and any amounts outstanding beyond 45 days of acceptance (section 15, MSMED Act, 2006). These affect the deduction under section 43B(h) of the Income-tax Act, 1961 and must be disclosed in the financial statements under section 22 of the MSMED Act. ****

5. Supplier invoices unpaid beyond 180 days. Input tax credit must be reversed with interest (second proviso to section 16(2), CGST Act, 2017); pay or reverse.

6. TDS deducted under the correct section for each contract type; certificates issued.

7. Customer contracts with unbilled milestones or expired price terms.

Risk and compliance

8. Auto-renewals in the next 180 days with notice deadlines and price mechanisms; decisions assigned.

9. Contracts with personal-data processing and no DPA. Section 8(2) of the DPDP Act, 2023 requires a valid contract with every processor from 13 May 2027; list the vendors and schedule the addenda.

10. Regulated outsourcing (for banks, NBFCs, insurers): vendor agreements checked against the RBI's 2025 outsourcing Directions' agreement-content requirements; exit plans in place.

11. Guarantees and indemnities outstanding: amounts, expiries, releases due; these are contingent liabilities for the accounts.

12. Related-party agreements: approvals under section 188 of the Companies Act, 2013 where required; disclosures. ****

13. Leases: registration status for leases over a year; escalations applied correctly; lock-in and renewal dates.

14. Post-term non-competes and other unenforceable clauses in templates: remove at the next revision (section 27, Indian Contract Act, 1872).

15. Template versions: contracts on superseded templates, especially those predating the DPDP Rules and the 2022 First Schedule amendment; plan re-papering.

Running the audit

• Owner: finance for 4-7 and 11-12; legal for 2, 9-10, 14-15; operations for 1, 3, 8, 13.
• Output: a one-page summary for the audit committee (counts, amounts, actions) and a task list with owners and dates.
• Timing: start 60 days before year end; the MSE and 180-day items need cash decisions before the close.

Making next year easier

Every check above is a report if the fields exist at signature: stamp status, MSE flag, data-processing flag, renewal fields, guarantee amounts, template version. Capture them at intake, and next year's audit is a morning, not a month.

Where Legatio fits. Legatio holds the executed copy, stamp certificate and audit trail per contract, carries the MSE, data-processing, renewal and template-version fields, and produces the fifteen checks as reports. The accounting and disclosure positions are for your auditors.

Position stated as of October 2026. General information, not accounting, tax or legal advice.