A statutory audit can be defined as a legally required review that is performed to check the overall accuracy of a company’s financial records and statements. The main purpose of performing statutory audit is determining whether the organization is presenting with an accurate and fair representation of its current financial position. It is performed by closely examining accounting information from bookkeeping records, bank balances and financial transactions. In most cases, an auditor or a CA is hired to oversee the process of statutory audit in order to make sure that all the steps associated with the process are carried out properly.
Every country may have its own rules and regulations when it comes to keeping its accounting books perfectly up-to-date and presenting with related paperwork from time to time. While every organization carries out internal audits, it is also important to perform statutory audits that are performed for declaring the results of all financial transactions and accounting processes that are carried out within the company. A professional auditor or CA examines all the financial transactions and accounts to ensure that the audit results are made available to the general public.
The purpose of carrying out an audit is to check the ways in which a company spends the shareholders’ money and earns profits for the shareholders. The audits also see to it that the methods used for spending such money is in accordance with the laws and policies actively implemented for such use. It is factors such as these that make statutory audits so important.
It is to be remembered here that an audit is not an investigation: being subjected to a process of statutory audit does not indicate that there are lapses, non-compliances or fraud in the organization. On the other hand, it can be seen as a control, that is designed for helping to prevent such illegal activities, like misappropriation of funds through carrying out regular examination of the numerous records presented by some competent third party. This same rule also applies to all other forms of audits. Every company and governmental body is required to go through such statutory audits on regular intervals.
One of the major aspects of statutory audits is that these audits are required by the regulation or statute that is enacted through the legislative body of the government with which the business organization is associated. These audits can be performed on multiple levels as per the requirements. Every such audit is governed by a set of laws which are to be followed by the auditor as well as the company or governmental body that is subjected to such an audit. All kinds of transactions are taken into consideration before the final report of the audit is presented.
For more information on our statutory audit services, please see: Assurance and Controls