Corporate entities conduct several types of audits to ensure corporate compliance. Companies cannot overlook the business laws at any cost. If they do so, they might be penalised by the concerned authorities. While some audits are conducted by in-house employees, some are conducted by external entities. A statutory audit is among the audits conducted by external entities. Read on to understand the importance of statutory audit services for companies.
What exactly are statutory audit services?
A statutory audit involves cross-checking the company’s financial records. It is usually done by an external entity, like an external CA firm. An organisation’s financial records, principles and ethics are checked during a statutory audit. In a statutory audit, financial statements, bank statements, ledgers, and financial books of an organisation are evaluated. In addition, all financial documents required for tax purposes are checked in a statutory audit.
Besides the tax documents, a statutory audit will also examine documents related to operational processes. Bills, invoices, orders, purchases, and other documents are also checked in a statutory audit. Every financial statement or document is checked to ensure the company is on the right side of the law. In every jurisdiction, corporate entities are required to maintain the accuracy of their financial documents. For the same rationale, statutory audits are essential for corporate entities.
Understanding the types of statutory audits
There are several sub-categories of a statutory audit. Also, a statutory audit is called by other names in different jurisdictions. Different types of statutory audits are mentioned in the Companies Act 2013. One can also find different types of statutory audits in the Companies Rules 2014. Different types and sub-categories of statutory audits for corporate entities are as follows:
- Financial audit
- Cost audit
- Secretarial audit
- Tax audit
- GST audit
- Concurrent audit
- Branch audit
- Stock audit
What statutory audits are necessary for corporate entities?
Statutory audits are mandatory for corporate entities according to the law. The Companies Act 2013 and Companies Rules 2014 indicate the requirement for a statutory audit. A statutory audit of all financial statements and fillings is compulsory. Private and public have to look for statutory audit services, irrespective of their size or annual turnover.
The condition for statutory audit changes for LLP (Limited Liability Partnerships). LLP firms having an annual turnover of more than INR 40 lakh or a capital contribution of more than INR 25 lakh are required to conduct statutory audits. Any company that ignores statutory audits might be penalised. For non-compliance on statutory audits, a penalty between INR 25,000 and 5,00,000 will be imposed.
What’s the process for a statutory audit?
For a large corporate entity, the statutory audit process might be exhaustive. After registration, a corporate entity must appoint an auditor within a month. The statutory audit process involved cross-checking each financial document and statement. Since the process is exhaustive, internal employees might not do it. Therefore, it is always better to look for external statutory audit services. AKM Global has a dedicated team of statutory auditors to help you. Appoint a statutory auditor now!
