Statutory Audit
A statutory audit is a legally required review of the accuracy of a company's or government's financial statements and records. An audit is an examination of records held by an organization, business, government entity, or individual, which involves the analysis of financial records or other areas.
What is a Statutory Audit?
A statutory audit is a mandatory audit of a company’s financial records by an external entity. This audit is mandated by statute or law that governs an organization’s principles and ethics.
In general, a statutory audit is conducted by examining bank accounts, financial statements, transactions, bookkeeping records, ledgers, and other critical documents that are submitted for tax purposes and Govt requirements.
But it can also include business operations-related documents such as invoices, purchase orders, bills, challans, and more.
Applicability of Statutory Audit:
As per Companies Act 2013 and Companies (Audit and Auditors) Rules, 2014, all public and private limited companies are mandated by law (or stature) to conduct a statutory audit of the financial documents and filings. In fact, the business turnover and the nature of the business of public and private limited companies don’t matter in the case of the statutory audit.
In the case of LLP (Limited Liability Partnership) firms, only these companies are mandated to perform the statutory audit:
Annual turnover crosses Rs 40 lakhs or
Capital contribution is more than Rs 25 lakhs
Given below are the important areas of consideration one has to look into while conducting the statutory audit of a company:
- Research the control environment of the organisation.
- Testing of Internal Controls.
- Audit of Balance Sheet.
- Audit of Profit & Loss Account.
- Audit of GST.
- Audit of TDS.