In India, the laws pertaining to Statutory Audit are prescribed under Companies Act, 2013. In general terms it is an audit of the Financial Statements of the Company i.e. of the Balance Sheet and Profit & Loss Account of the company. It is mandatory to conduct statutory audit and it has to be performed by an Independent Chartered Accountant if a business meets certain criteria and thereafter a report is to be prepared by the Auditor stating the facts, opinion, adverse remark and disclaimer of information (if any) observed by the Auditor in the format as prescribed by the regulator. Independent auditor means the auditor should not have any relation with the auditee (The company in which the audit is required to perform).
Statutory Audit is of two types
Who Requires to Get its books of Account Audited?
Objectives of Statutory Audit
The objective of statutory audit can be categorized into primary objectives and subsidiary objectives.
Primary Objectives of Statutory AuditThe primary objectives of the statutory audit are as follows:
Subsidiary Objectives of Statutory AuditSubsidiary objectives of Statutory Audit are as follows:
Tests under Statutory Audit Procedure
An auditor has to carry out an array of tests to complete the Statutory Audit in compliance with government rules & regulations. This starts with confirming the internal working environment of the company in consonance with the standards set for the industry and ends at the examination of financial accounts and balances.
Let us read the procedure in a precise and proper manner.
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Process of Statutory Audit
The whole process of design registration can be divided into the steps mentioned below:
Statutory Audit should take the basic understanding of internal and external environment of the company auditor should obtains a deep understanding of the business, Financial Statements and books of accounts prepared by the Business and internal control.
In the next step, the auditor will verify the Financial Statements of auditee and verify it on sample basis. The important thing under any audit is to make sample, it is called sample audit.
Based on the data and information collected by the auditor from the various procedure performed procured now auditor will prepare a report thereby expressing the opinion on the Financial Statements based on the audit evidence collected portraying a true and fair view on the financial statements i.e. whether the financial statement prepared by the management are free from all material misstatement.
Types of Audit Opinion
Who Is Eligible to Appoint as a Statutory Auditor
As per the section 141 of companies Act 2013 statutory auditor of a company should be a Chartered Accountant practicing in India. In case auditee is a firm then maximum number of partner in such firm should be Chartered Accountant practicing in India.