Meaning of a Statutory Audit:
Statutory Audit means a type of audit mandated by the law or a statute to make sure that the book of accounts is true and fair which is presented to the public and regulators. A statutory audit is a mandatory audit of a company’s financial records by an external entity. A statutory audit is another name of a financial audit. It is essentially an audit of the final statements of a company, i.e. the profit and loss and the balance sheet.
What is the Purpose of a Statutory Audit?
The main purpose of statutory audit is to provide an independent, true and fair picture of the financial position of the Company to the shareholders. This audit is required by a statute or law that oversees the principles and ethics of a company. A statutory audit examines bank accounts, financial statements, transactions, bookkeeping records, ledgers, and other key documents provided for tax purposes and government obligations in general.
What is the Applicability of Statutory Audit?
As per Companies Act 2013 and Companies (Audit and Auditors) Rules, 2014, all public and private limited companies are mandated by law (or stature) to conduct a statutory audit of the financial documents and filings. In fact, the business turnover and the nature of the business of public and private limited companies don’t matter in the case of the statutory audit.
In the case of LLP (Limited Liability Partnership) firms, only these companies are mandated to perform the statutory audit:
- Annual turnover crosses Rs 40 lakh or
- Capital contribution is more than Rs 25 lakh
Who can be Appointed as Statutory Auditor?
A practicing chartered accountant or a Chartered accountant firm or LLP can be appointed as a statutory auditor of a company.
What is the Process of Statutory Audit?
The process of statutory audit starts as soon as the company is registered. The entire statutory audit procedure is exhaustive and depends on the nature of the business.
Every public and private company or LLP company that meets the above criteria should appoint an auditor within 30 days of the company’s registration.
During each AGM, the shareholders also recruit an external auditor, who holds the position from the conclusion of one AGM to the next.
As per the Companies Act (Amendment) 2017, no auditor for statutory audit can hold the consequent position more than five times.
What is the Penalty of non filing or delay in filing Statutory Audit Report?
In the case of non-compliance of statutory audit, Govt can impose a fine between Rs 25,000 to Rs 5,00,000. The defaulting officer can be imprisoned for one year and imposed a penalty between Rs 10,000 to Rs 1,00,000 or both.
For more details contact out team at +91-7991109093 or drop email us at [email protected]
Note: This Post was last updated on November 2, 2022
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation i.e. November 2, 2022. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, We assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. We assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL WE SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.
