Statutory Audit

• What is Statutory Audit? 

• How Statutory Audit Functions? 

• Advantages of the Statutory Audit 

What is Statutory Audit?

A statutory audit denotes a legal audit or accuracy check of the financial statements required by the law. A statutory audit examines a company's financial statements or any other authorized entity like the government. A statutory audit is typically proposed to analyze a company or organization's real-time and accurate financial position by evolving valuable details, such as bank accounts, a list of the board of directors, financial transactions, income and expenses, tax savings and calculations, and other accounting records. 

The main purpose of a Statutory Audit is a financial Audit done by the legislative authority that ensures that the company's funds and all financial records are fair and accurate. There is no scope for any mishappening or misconduct by the third party that scrutinizes or performs the Statutory Audit of a Company's financial records. If there is some misconduct, it will denote the misappropriation of funds. It shows that there is some wrongdoing in the company's financial statements. 

How Statutory Audit Functions? 

Only selective authorized identities are subject to undergo a mandatory Statutory Audit, not all. These particular identities are Banks, Government corporations, insurance companies, brokerage houses, etc. A statute Audit is a regulation sanctioned by the judiciary under which a particular organization's branch comes. Centre or State government brings multilevel laws related to the Statutory Audit.

All companies, including Private Companies, Person Companies, Nidhi Companies, Limited Companies, etc., must conduct statutory audits regardless of the nature of business. LLP and Proprietorship must also complete statutory audits subject to certain conditions. 

Advantages of the Statutory Audit

• Offer credibility

• Ensures compliance

• Better Financial Planning and Budgeting

• Prevent fraud

• Authenticity of Financial Statements

• Easy accessibility for loans 

• Reduces risk for companies