Statutory Audit is Audit of Books of Accounts according to requirements of any Statute to ensure true and fair view of the accounts as well as compliance with any special requirements of the statute under which audit is undertaken.In simple terms statutory audit in India is equated with Audit under the Companies Act.
Every company incorporated under the companies act is required to get its accounts audited by a Chartered Accountant in Practice to ensure true and fair view of the accounts. Further, the auditor has to ensure compliance with various provisions of the Companies Act. Statutory Audit ensures reliability of annual accounts of the company for various consumers of Accounts of the Company like government, shareholders, debtors, creditors, bankers etc.
The complexity of Statutory Audit Function has increased manifolds during recent times. Globalisation, Fast Changing Business and Statutory environment combined with need for synchronisation with various global accounting standards and ever increasing reliance on audited accounts by a variety of interested parties has put ever increasing responsibilities on the shoulders of any statutory auditor.
Our statutory audit team consist of ever improving set of skilled individuals trained extensively for conducting auditing function. Our auditing team is trained and updated on the ever changing compliance requirements to stay ahead of the curve.
Our statutory audit department is geared to conduct audit under any applicable statute along with complying with various global standards to ensure useability of audited accounts for most of the interested parties like financial institutions, shareholders, directors, investors, government, bank and general public at large.
For any information / query regarding Statutory Audit feel free to contact us.
Statutory audit is mandatory for all companies registered in India under the Companies Act, 1956 and Companies Act, 2013, as well as Limited Liability Partnerships (LLPs) having a turnover exceeding Rs. 40 Lakhs or a contribution of Rs. 25 Lakhs. As per Section 139(1) of the Companies Act, 2013 read with Rule 3 of Companies (Audit & Auditors) Rules, 2014, every company must appoint an individual or firm as an auditor.
At Ahuja & Ahuja, we follow a thorough process while conducting statutory audits, which includes:
- Obtaining the appointment letter and board resolution copy
- Obtaining a no-objection certificate (NOC) from the previous auditor
- Filing a no-disqualification status to the company
- Filing Form ADT-1 to ROC
- Sending a letter of engagement to the company
- Assessing the internal control of the company
- Formulating an internal audit program action plan and calendar
- Conducting the audit as per IGAAP, Companies Act, ICAI Accounting Standards, and Auditing Standards
- Forming an opinion on the financial statement prepared by the company
- Reporting to shareholders
- Attending AGM
As per the statutory audit requirement, all companies, including Private Limited Company, One Person Company, Limited Company, Section 8 Company, Nidhi Company, and Producer Company, must appoint a Statutory Auditor, regardless of the nature of business and sales turnover. In addition, all companies and Limited Liability Partnerships (LLPs) with an annual sales turnover exceeding Rs. 40 lakhs or capital contribution exceeding Rs. 25 lakhs, regardless of the nature of business, must have their accounts audited.
When conducting a Statutory Audit, there are several important areas of consideration that our team focuses on:
- Testing of Internal Controls: A crucial component of a Statutory Audit is assessing the effectiveness of the client entity’s system of internal controls to detect and prevent fraud and errors. Our auditors conduct thorough testing to determine the strength of the controls, which helps us determine whether we can rely on them as part of our auditing activities.
- Verifying Balance Sheet Items: Another essential aspect of a Statutory Audit is verifying the accuracy of information found in a company’s Balance Sheet. Our auditors evaluate the supporting documents for secured loans and fixed assets, such as bank statements, invoices, and depreciation working, to ensure their accuracy.
- Verifying Profit & Loss Account Items: To test Profit & Loss A/C items, we conduct a comparison of year-over-year numbers and industry benchmarking, trend analysis to determine whether metrics are improving or deteriorating, and checking individual sales and purchase breakups. We also ensure that preliminary expenses have been capitalized within five years and verify the valuation of closing stock as per AS-2.
- Testing TDS Related Compliances: Our team evaluates the compliance related to TDS by checking voucher entries, verifying source documents, and reconciling books with challans and returns.
- Other Important Checks: In addition to the above areas, we also check whether the dividend paid by the company is within the specified limits, ensure that Provident Fund, ESIC, Gratuity, Bonus, and Leave encashment payments are compliant with respective acts, and verify whether loans and advances are permitted by the Companies Act, 2013, and Income Tax Act, 1961.
We work diligently to ensure that our clients’ financial statements comply with all applicable laws and regulations. Our statutory audit process involves a thorough examination of financial statements, internal controls, and other relevant documents to ensure that they provide an accurate and complete representation of the company’s financial position.
Our statutory audit services cover all types of companies, including private and public companies, and limited liability partnerships (LLPs). Our team of Chartered Accountants is qualified and registered to conduct statutory audits as per the Companies Act, 2013, and the rules and regulations set by the Institute of Chartered Accountants of India (ICAI).
We are committed to delivering high-quality services and ensuring that our clients’ statutory audit requirements are met in a timely and efficient manner. We also provide guidance and recommendations for improving financial reporting and internal controls, which can help companies strengthen their operations and financial management.
Frequently asked questions about statutory audits:
Can a CA, being a relative of a company’s director or Key Managerial Personnel, be its statutory auditor?
No, as per section 141(3)(f), a person whose relative is a director or is in the employment of a company as a director or Key Managerial Person shall not be eligible for appointment as an auditor of that company.
Who can conduct a statutory audit?
Only a Chartered Accountant, or a firm or a Limited Liability Partnership firm (LLP) having a majority of partners, practising in India, qualified for appointment as an auditor of the company can be appointed as an auditor of the company.
What is the penalty for non-compliance with a statutory audit?
For non-compliance with the statutory audit provisions, the fine may range from Rs. 25,000 to Rs. 5,00,000 for the company. For every officer in default, the fine may range from Rs. 10,000 to Rs. 1,00,000.
What is the applicability of Statutory Audit?
Private Company/ Public Company: Statutory Audit is mandatory for a company irrespective of its turnover, profits, etc. If the company is incurring loss even then, a statutory audit is required. LLP: Statutory Audit is applicable if the turnover of the LLP in any financial year exceeds Rs. 40 Lakhs or its contribution exceeds Rs. 25 Lakhs.
What is the difference between an internal audit and a statutory audit?
Internal Audit is carried out to provide unbiased and independent reviews of the system and processes of the business organizations. It is done to detect fraud or prevent errors. A statutory Audit is a type of audit mandated by the law or a statute to ensure that the books of accounts are true and fair as presented to the public and regulators.
Statutory audit is done by a practising chartered accountant, whereas internal audit is done by the company’s employee. The company’s shareholders appoint a statutory auditor in the annual general meeting, while an internal auditor is appointed by the company’s management.