A statutory audit is a legal procedure to be done to review the accuracy of an organization’s financial statement and records. It is mandatory to conduct a statutory audit for government organizations to monitor and evaluate their performance.
Generally, the statutory report is prepared for the public. It helps to determine whether the company is providing a fair and accurate financial information to the public. The statutory audit examines information such as bookkeeping records, bank balances, and financial transactions. The statutory auditors are selected by the General Meeting of Shareholders for the period of 3 to 5 years.
Advantages of Statutory Audit
The advantages of conducting a statutory audit for one’s company are:
- It improves the reputation of the company
- The statutory audit report enhances the credibility and reliability of the firm
- It helps the prospective clients in evaluating the company before doing any business
Statutory Audit Procedure
The statutory audit procedure includes an understanding of the organization’s operating environment and controls. A statutory auditor needs to test internal mechanisms as well as details of accounts. Thus, the statutory audit procedure comprises the following steps:
1. Understand the Operating Environment
An auditor checks whether the organization follows industry guidelines and regulatory criteria. The statutory auditor examines the internal processes by sending surveys, questionnaires, checklists and formal notifications to department employees.
2. Understand Controls and Procedures
An auditor learns about the organization’s controls by evaluating industry publications or past audit reports and working papers. He/she also asks employees, external auditors or industry consultants to understand the controls and processes of the firm.
3. Test Account Balance and Details
The statutory auditor checks account balances to ensure that financial reports are error-free and are in line with regulatory standards. He/she also evaluates the accounts and balances on an insurance, a bank to check that such balances are complete and accurate.
What Are Statutory Audit Requirements?
A firm needs to have the following documents before getting a statutory audit started:
- Details of fixed assets
- Cash/Bank or Fixed Deposit Receipt (FDR) information
- Information on secured and unsecured loans & advances
- Trade payables & receivables
- Purchases & import purchases
- Details of loans
- Domestic sales information
- Details of inventory
- Administration and selling expenses
- Share capital
- Details of foreign exchange earnings & expenditures
- Statutory dues & other incomes
What is the Difference between Statutory Audit and Internal Audit?
A statutory auditor is appointed by the shareholders of the company
An internal auditor is appointed by the management
The audit is conducted after preparing the final accounts
Internal audit is a continuous process
Statutory audit is a legal requirement
The scope of an internal audit is limited to the management
It is conducted by an external auditor or an audit firm
It is conducted by the employees of the organization or an audit firm
A statutory audit report must comply with certain standards
No such rules hold for internal audit
JAXA Statutory Audit Services in Dubai, UAE
- We analyze your company to highlight any problems, and provide the suitable suggestions
- We use up-to-date and innovative audit software to assist our client
JAXA is a Dubai based financial consultancy firm offering a wide range of services including auditing, accounting, VAT, tax consulting, software consultancy, and management. We have been providing the best audit services in and around Dubai. Our audit team works with you for the well-being of your firm. We adopt up-to-date audit software to analyze and identify any problems, and provide the best solutions.
For any statutory audit services, do contact us – we’d be happy to assist!
Is statutory audit compulsory?
Yes, statutory audit has been made mandatory by law.
How long is the mandate for statutory auditors?
The mandate period for a statutory auditor is 3 years.