Statutory auditing is a type of audit required by law or statute to ensure that the book of accounts presented to the public and regulators is true and fair. A statutory audit is required if the company meets certain criteria. In most cases, a statutory audit refers to a financial audit.
PROCEDURE FOR STATUTORY AUDIT
Industry regulators and government agencies both require statutory audits. The statutory audit procedure is diverse and includes an understanding of a business entity’s operating environment and controls. The steps are as follows:
UNDERSTANDING THE OPERATING ENVIRONMENT
The auditor determines whether the industrial guidelines and regulatory criteria are ethical by learning about them. The statutory audit procedure entails the distribution of questionnaires, checklists, surveys, and formal notifications.
UNDERSTANDING CONTROLS
An auditor learns about a business entity’s operations control by asking employees or external auditors. Even reading industry publications or previous year audit reports and working papers of the company will provide the auditor with knowledge of operation control.
TEST CONTROLS
The statutory audit process includes an evaluation of corporate procedures by a specialist conducting regulatory audits and operating mechanisms for fraud or error prevention. Then they agree to industrial practices and regulatory standards. These operating controls are adequate, performed correctly, and understood by all employees involved in the process, and they are also audited.
TEST ACCOUNT BALANCE
Account Balances are tested to see if the financial reports are error-free and under regulatory standards, statutory principles, and industry practice.
ACCOUNT DETAILS
The auditor then performs tests of accounts and balances on the account balances of a bank, insurance company, or hedge fund to ensure that the audited statutory financial statements are accurate and complete.
STATUTORY AUDIT TYPES
The following are the two most common types of statutory audits:
TAX AUDIT
The Internal Revenue Service (IRS) examines a tax return to ensure that the income and deductions are correct. A tax audit is performed when the IRS decides to examine the tax return more closely and confirm that the income and deductions are correct.
COMPANY AUDIT
Company audit means that a company’s balance sheet, profit and loss account, income and expenditure account, or cash flow statement will be audited by the company’s auditor.
STATUTORY AUDIT
Companies and organizations conduct various audits to ensure that they follow the rules of the law. While some audits, such as internal audits, are performed by corporate employees, others, such as statutory and GST audits, are performed by third-party entities such as chartered accountants. Some businesses must have external audits if they meet certain annual turnover and capital infusion criteria.
WHAT DOES A STATUTORY AUDIT ENTAIL?
A statutory audit is a mandated audit of a company’s financial records by an external entity. This audit is mandated by a statute or law that governs a company’s principles and ethics. A statutory audit investigates bank accounts, financial statements, transactions, bookkeeping records, ledgers, and other key documents provided for tax purposes and general government obligations. However, it can also include commercial documents such as invoices, purchase orders, bills, challans, etc.
PROCEDURES FOR STATUTORY AUDITING
As soon as the company is registered, the statutory audit procedure begins. The full statutory audit method is extensive and depends on the type of business. As soon as the company is registered, the statutory audit procedure begins. The full statutory audit method is extensive and depends on the type of business. Every public and a private corporation or limited liability partnership (LLP) that meets the conditions mentioned above must appoint an auditor within 30 days of the business’s registration. We provide internal audit services in UAE. Appoint your auditor now and get the right internal audit services in UAE.