Statutory Audit is a mandatory audit of the financial statements prescribed by a Statute or a Law for ensuring that the accounting books presented to public and regulators are genuine and fair. Statutory Audit is always performed by a professional Chartered Accountant who has sufficient experience in handling such projects. The CA is someone who performs the Statutory Audit process neutrally and is independent from the business.
In India, Statutory Audit is prescribed by the Companies Act and guided by various other laws as well as accounting and auditing stadndards. The Chartered Accountant carries out the audit based on the requirements of various requirements of the statutes. Statutory Audit of banks is also mandatory. The Statutory Auditors are appointed by the RBI along with ICAI. A rigorous audit is carried out every year just as previous financial year comes to an end. The Statutory Audit is performed in all the branches of the banks.
Statutory Audit Process
Statutory Auditors need to make sure that an audit report that is issued by them perfectly complies with all the rules and requirements associated with Revised SA 700, SA 705 and SA 706. SA 700 deals with formation of an opinion as well as reporting on various financial statements. SA 705 focuses on making modifications to such opinions in Independent Auditor’s Report. SA 706 emphasizes on the matter paragraphs as well as other matter paragraphs observed in Independent Auditor’s Report. These days every statutory auditor is presented with a time frame within which they are supposed to perform the auditing of the bank branches allotted to them. The auditor must acquire all necessary information associated with the auditing process.
The Statutory Auditor must make sure that the report that they compile and create must include quantification of deposits, advances, interest expenses and interest incomes. The things that must be checked out perfectly while performing Statutory Audit for the banks include cash verification procedure, verification of the loan accounts and all tax-related items.
Creating the audit report
Once the audit is carried out properly, the auditor needs to come up with an audit report that clearly states all the findings that he has come across in the main auditing process. In the report, the Chartered Accountant has to mention all the following points:
- The accuracy of the balance sheet in terms of all the entries and amounts as well as the necessary particulars so that they reflect all transactions of the banks handled in a proper manner.
- The presence of any transaction that has been performed by the bank branch that was not within its powers.
- The profit and loss account with all its details so that they reveal a true picture of the balance pertaining to the specific accounting period.
- Any other kind of transaction or issue that the auditor thinks must be brought immediately to the attention of Statutory Central Auditor.