A statutory audit is a legally required review of the accuracy of a company’s or government’s financial statements and records. The purpose of a statutory audit is to determine whether an organization provides a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records, and financial transactions

Yes. The term statutory denotes that the audit is required by law.

A statutory audit is an official inspection of an organization’s financial records by an external entity. It is designed to determine if the subject’s financial statements and records are accurate, and it is not voluntary.

Statutory audits mainly apply to publicly traded companies, government agencies, and organizations working in the public’s interest. Statutory Audit Checklist –  ( Take Check list form  myaudit – + https://myaudit.co.in/statutory-audit-management-software.html

Not all companies or organisations must have a statutory audit. Small companies are usually exempt, unless they are charities (which must follow the specific guidelines for that sector) or members of a wider group

 To be exempt from audit, a small company must meet two out of three of the following criteria for two consecutive years (or its first year for new companies):

• Turnover should not be more than £10.2m
• The balance sheet total should not be more than £5.1m
• The average number of employees should not be more than 50

It’s important to note, however, that even if your company meets the criteria outlined above, there may still be cases when a statutory audit is required, for example if a shareholder, lender or grant provider requests one.

As per the Companies Act 2013 and Companies (Audit and Auditors) Rules, 2014, the following types of statutory audits exist (but are not limited to):

Financial Audit

Companies Act 2013- Section 139

Cost Audit

Companies Act 2013- Section 148

Secretarial Audit

Companies Act 2013- Section 208

Billing & Metering Audit

Telecom Regulatory Authority of India (TRAI)

Tax Audit

Income Tax Act 1961- Section 44AB

Concurrent Audit/Internal Audit

National Health Mission

Financial Audit of Insurance Companies, Partnership firms, HUFs, cooperative societies, LLPs, proprietorships, trusts, banks, etc.

GST Audit

CGST Act 2017- Section 35(5)

Branch Audit, Stock Audit, Concurrent Audit, etc.

Banking Act

Audit of Credit Rating Agencies and Stock Brokers

SEBI – Securities and Exchange Board of India

Concurrent & Internal audit for depository operations

NSDL – National Securities Depository Limited

Performance Audit of Cooperative Societies

Cooperative Societies Act

 To be exempt from audit, a small company must meet two out of three of the following criteria for two consecutive years (or its first year for new companies):

• Turnover should not be more than £10.2m
• The balance sheet total should not be more than £5.1m
• The average number of employees should not be more than 50

It’s important to note, however, that even if your company meets the criteria outlined above, there may still be cases when a statutory audit is required, for example if a shareholder, lender or grant provider requests one.

Financial statement audits, including statutory audits, allow auditors to examine financial statements prepared by company management and express their opinion on whether they are prepared and presented by certain applicable financial reporting standards based on certain auditing standards. It is an external entity’s mandated audit of a company’s financial records. This audit is required by a statute or law that oversees the principles and ethics of a company.

Following are the objectives to be realised: –

• Detection and prevention of errors
• Detection and prevention of fraud
• Clerical errors
• Compensating errors
• Errors of principles

Some of the important advantages of the statutory audit are as follows:

1. It increases the authenticity of the financial reports as the auditor properly verifies the statements.
2. It helps to improve the management to perform their job efficiently.
3. Improves the organisation’s reputation because the financial reports are free of errors, fraud, misrepresentation and inaccuracies.
4. Minimize the risk of fraud in an organisation.
5. It improves the organisation’s reputation because the financial reports are devoid of errors, fraud, misrepresentation and inaccuracies.
6. It helps to gain the trust of shareholders, banks and the government.
7. The auditor includes a comment on the organisation’s internal control, whether they are there and working efficiently or not. He also advises the organisation about the areas where internal control is weak, and risk is more.
8. Even though audit might not apply to certain small companies, if they get themselves audited, it helps them keep their systems strong and easily obtain bank loans and other facilities.

Some of the important disadvantages of the statutory audit are as follows:

1. Due to sampling, the accuracy of the audit report may be affected.
2. If there is any conflict of interest among the audit personnel, it can affect the quality of the audit.
3. Audits are undoubtedly costly reports, and in the case of statutory audits, outsourcing increases the cost.
4. Evidence constraint may lead to the possibility of error.
5. The hiring of inexperienced audit staff.
6. In certain cases, time limits may also affect the accuracy of the audit.
7. The auditor performs an audit on a sampling basis and cannot do 100% checking. Thus, they cannot give absolute assurance; only a reasonable assurance is possible.
8. Numerous things in an audit depend on the judgment of the auditor. It may vary from person to person.