Statutory audit is a legitimate process that is used to gather financial information reflected through the company’s financial statement like the Profit & Loss Account, Balance sheet and Cash flow statement. Thus, statutory audit gives a realistic view of the company’s mismanagement or fraud assessment, if any, to prevent malpractices and ensure an ethical and transparent system in conducting business.
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The primary objective of the Statutory Audit is to ensure that the financial statement (such as balance sheet, profit & loss Account etc.) provides a true & fair view of the company financial state of affairs. As per the company’s Act it is mandatory for all the Registered companies to get their books of Accounts audited by the practicing Chartered Accountantsm Statutory audit means audit of statutory areas i.e. Income tax, Service tax , VAT ,ESI, Provident fund etc.
The primary objective of ‘Statutory Audit’ is “to ensure that the financial statements i.e. the Balance Sheet, Income & Expenditure Account and Receipt & Payment Account, give a true & fair view and are free from any material misstatements” Statutory Audit of the financial statements should provide reasonable assurance that the accounts have been prepared in accordance with the Generally Accepted Accounting Principles are free of any material misstatements, errors and discrepancies
Small exempt private companies (“EPCs”)
A.Collection and Remittance of CST & VAT
B – Collection and Remittance of Service Tax .
C – Deduction and Remittance of TDS
D – Deducion and Remittance of Provident FUND & ESI
E – Deduction and Remittance of Professional Tax
What Does a Statutory Auditor Do
A statutory auditor is an external auditor appointed by a company to audit its books or other activities as required by law. Generally, this auditor reviews a company’s accounting practices and determines if they meet minimum requirements. Sometimes the statutory auditor is hired by the accounting committee of the board of directors; at other times he or she may be employed directly by the board of directors. It is rare that management of a corporation would hire this auditor.
Normally, the statutory auditor reviews the accounting practices of the corporation each year. This review includes the most important accounting activities, internal controls, and reporting procedures. The auditor’s review compares the company’s activities to best practices as found in the country in which the company is located. The auditor must then present a report to the audit committee of the board of directors, or directly to the board of directors.
An auditor works closely with the management of the company to gather information necessary to complete the required work. Each auditor exercises caution in the relationships he or she develops with company management because the statutory auditor must always be considered independent. Some audit committees and boards of directors limit any additional work that the statutory auditor may do for the company in order to ensure the auditor’s independence.
AUDIT OF ACCOUNTS OF BRANCH OFFICE
Where a company, whether a public or a private limited, has a branch office, its accounts should also be audited. The audit of the accounts of branch office can be done either by:
- The company’s auditor
- By any other person who is qualified to act as the company’s auditor
However, if the branch is situated in a country outside India, a person who is duly qualified to act as auditor of the branch in accordance with the laws of that country, can also be appointed as auditor of branch.