Several audits and audit processes are in place at companies and different entities to guarantee that all rules and regulations are followed.
The organisation's internal workers do this. Internal audits are the name given to these sorts of audits.
On the other hand, others are carried out by separate auditors, i.e. chartered accountants recruited for the purpose.
Regardless of the nature of their business or turnover, all public and private companies must undergo a statutory audit according to Types Of Statutory Audit.
This article will address a statutory audit and the forms of statutory audit for organisations and small enterprises. It also gives an insight into the process and goals of the statutory audit.
What Exactly Is a Statutory Audit?
A statutory audit is a legally mandated examination of the financial accounts and records of a firm or government.
A statutory audit examines information such as bank balances, bookkeeping records, and financial transactions to evaluate if an organisation presents a fair and accurate portrayal of its financial status.
The term statutory indicates that the audit is mandated by law. A statute is a law or regulation made by the organisation's affiliated government's legislative arm.
Statutes can be adopted at the federal, state, or local levels. Law in business also refers to any rule established by the organisation's executive team or board of directors.
A statutory audit's primary goal is to determine whether an organisation presents its financial condition fairly and truthfully.
All public and private limited companies are required by law (or statute) to conduct a statutory audit of their financial documents and filings, according to the Companies Act 2013 and Companies (Audit and Auditors) Rules, 2014.
The Different Types of Statutory Audits
All municipalities may be required by state law to submit to an annual statutory audit.
This could include auditing all accounts and financial transactions and publicising the audit results.
The goal is to hold the local government accountable for how taxpayer money is spent.
Many government agencies are audited on a regular basis. This helps guarantee that any monies distributed by a bigger governmental institution, such as the federal or state level, have been spent lawfully and in accordance with any applicable rules or requirements.
It is also normal for multinational corporations to have certain foreign governments that want access to the results of statutory audits.
While proceeding with the statutory auditing, make sure the auditing department follows the Checklist for Statutory Audits of Companies.
The following forms of statutory audits exist in this Types Of Statutory Audit(but are not limited to) under the Companies Act 2013 and the Companies (Audit and Auditors) Rules, 2014:
- Financial Audit
- Cost Audit
- Secretarial Audit
- Billing & Metering Audit
- Tax Audit
- Concurrent Audit/Internal Audit
- GST Audit
- Branch Audit, Stock Audit, Concurrent Audit, etc.
- Audit of Credit Rating Agencies and Stock Brokers
- Concurrent & Internal audit for depository operations
- Performance Audit of Cooperative Societies
Exceptional Considerations in different Types Of Statutory Audit
Statutory audits are not required for all firms. Audits are performed on public corporations, investment firms, brokerage firms, banks, and insurance agencies.
Certain non-profit organisations are also subject to statutory audits. Small businesses are usually exempt.
A corporation must have a particular size and have a minimum number of workers, generally less than 50, to be exempt from an audit.
Procedure for Statutory Audit
The statutory audit technique is diversified and includes an understanding of a business organisation's working environment and controls.
The following stages are required in the statutory audit procedure:
- Gaining Knowledge of the Entity and Its Operating Environment
- Gaining Knowledge about Internal Control Systems
- Controls' Operational Effectiveness Testing
- Examining Account Balances
- Account Information Testing
The Goals of an Audit
Financial statement audits, including statutory audits, enable auditors to examine financial statements prepared by company management and express their opinion on whether they comply with certain applicable financial reporting standards and are presented in accordance with certain auditing standards.
It is the compulsory audit of a company's financial records by an external party.
This audit is mandated by a statute or regulation that governs a company's values and ethics.
The following are the goals that must be met in this Types Of Statutory Audit:
- Error detection and prevention
- Fraud detection and prevention
- Typographical mistakes
- Error correction
- Principle blunders
Statutory auditing can benefit an organisation in a variety of ways when they follow a statutory audit checklist.
This increases the authenticity of financial reports by properly verifying the statements, ultimately improving the organisation's reputation because the financial reports are free of errors, fraud, misrepresentation, and inaccuracies.
This contributes to gaining the trust of shareholders, banks, and the government and improving management's ability to accomplish their duties efficiently and without much difficulty.
Even though auditing may not apply to some small businesses, having their systems examined allows them to keep their systems solid and readily secure bank loans and other facilities.
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