One of the main types of audits is a statutory audit.
It is a legal requirement as per the state or national laws prevalent in the region. In India, the laws regarding a statutory audit are in the Companies Act, 2013. As per Companies Act, 2013, every company, irrespective of its sales turnover or nature of business or capital must have its book of accounts audited each financial year. Thus, the Board of Directors of a Company is required by law to appoint an Auditor within 30 days of incorporation and thereafter conduct an audit of its financial statements each financial year. Further, the accounts of a Limited Liability Partnership (LLP) must be audited if it has an annual turnover of Rs.40 lakhs or more or Rs.25 lakhs or more capital contribution.
A statutory 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. The purpose of a statutory audit is to ensure that these accounts of the company represent a fair and accurate picture of the company’s current financial position on the date of the balance sheet.
It is important that we understand the need for a statutory audit to be carried out. In the case of a company, the owners of the company are the shareholders. However, they do not run or manage the day to day affairs of the company. This is done by the board of directors and the management of the company. So the shareholders need assurance that the accounts maintained and published by the company are authentic and genuine. This is why the law requires that an independent auditor to conduct a statutory audit.
The independent auditor has full authority to check the financial records of the company and publish his findings via an auditor’s report. The shareholders and owners of the enterprise can then be assured of the authenticity and reliability of the financial statements.
Other stakeholders like creditors, employees, potential investors etc also benefit from the statutory audit. They too can base their decisions on these accounts, since they are authentic. The provisions relating to statutory audit and auditors are sections 139 to 147 of the new Companies Act 2013. It states the method of appointing an auditor, the eligibility of a statutory auditor and the duties and responsibilities of such an auditor.
Every company is required to file the annual accounts and annual return as per The Companies Act, 2013 within 30 days and 60 days respectively from the conclusion of the Annual General Meeting.