Statutory Audits
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;
* Tax Audit
Tax Audit is an Examination of Tax records under Income Tax Act 1961. Income tax audit is an examination of the business or tax returns of the individuals by the state tax authority.
* Company Audit
Company audit means verification of Financial statements i.e. Balance Sheet, Profit or Loss Account or Income and Expenditure Statement and Cash Flow Statement of the auditee Company. It is required to be done at the end of every Financial year.
Who Requires to Get its books of Account Audited?
Companies under Companies Act, 2013
As per the provisions of Companies Act, 2013, Every company regardless of its turnover or capital are mandatorily required to get their books of accounts audited every financial year.
Limited Liability Partnership (LLP)
In case of LLP, the accounts must be audited if the LLP has annual turnover of Rs. 40 lakhs or more, or capital contribution of Rs. 25 lakhs or more.
Proprietorships and Partnership Firms
The Income Tax audit is applicable if turnover exceeds Rs. 1 crore in case of business and Rs. 50 lakh in case of profession. The enhanced audit limit of Rs. 3 cr. and Rs. 10 crore are applicable, if certain conditions are fulfilled.
Objectives of Statutory Audit:
The objective of statutory audit can be categorized into primary objectives and subsidiary objectives.
Primary Objectives of Statutory Audit:
1. Examination of the financial statements of the company. |
2. Evaluation of arithmetical accuracy of books of accounts and verification of casting, posting, balancing, etc. |
3. Confirmation of the appropriate distinction between revenue and capital nature of transactions. |
4.Verification of the authenticity and validation of transactions. |
5. Confirmation of the value of assets and liabilities. |
6. Presentation of a correct and fair picture of operating results via income statement and financial position via a balance sheet. |
7. Confirmation of proper appropriation of funds. |
Subsidiary Objectives of Statutory Audit:
1. Detection and deterrence of errors |
2. Detection and deterrence of frauds |
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