Audit is like an official investigation to ensure that company’s accounting and other records are complete, the total income is computed correctly and company adheres to all the compliances under rules and regulation. There are two types of audit: Statutory Audit, i.e. compulsory under law and Voluntary, i.e not compulsory and done at discretion of the enterprise.
What is Statutory Audit?
A statutory audit is a legally required check of the accuracy of the financial statements and records of a company or government. A statutory audit is intended to determine if an organization delivers an honest and accurate representation of its financial position by evaluating information, such as bank balances, financial transactions, and accounting records.
Statutory means required or permitted by statute, therefore, statutory audit is a mandatory audit done by auditor appointed by the company.
Who are subjected to Statutory Audit?
Not all firms have to undergo statutory audits. Firms that are subject to audits include public companies, banks, brokerage and investment firms, and insurance companies. Certain charities are also required to complete statutory audits.
As per Companies Act 2013 and Companies (Audit and Auditors) Rules, 2014, all public and private limited companies are mandated by law (or stature) to conduct a statutory audit of the financial documents and filings. In fact, the business turnover and the nature of the business of public and private limited companies don’t matter in the case of the statutory audit.
In the case of LLP (Limited Liability Partnership) firms, only these companies are mandated to perform the statutory audit:
a) Annual turnover crosses Rs 40 lakh or
b) Capital contribution is more than Rs 25 lakh.
In the case of non-compliance of statutory audit, Govt can impose a fine between Rs 25,000 to Rs 5,00,000. The defaulting officer can be imprisoned for one year and imposed a penalty between Rs 10,000 to Rs 1,00,000 or both.
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