There are mostly three types of Audit that are available to a business. Statutory Audit is one of them and a kind of Audit that is mandated by the law of the jurisdiction of the statutes of the place. This Audit will help the government ensure that all the information about the financial status of the company are correct or not.
Here are some of the questions explained as to what statutory Audit is and how it can help in increasing the profitability of a business.
In the article below, we have tried to answer some of the questions which are asked frequently by businesses about Statutory audit, its advantages to a business, its requirements and other important questions..
What is a Statutory Audit?
It is not an easy matter for any business to conduct any kind of Audit. There are many steps and prerequisites which the management should keep in mind before conducting the audits. Also, there are many different types of Audit to choose from, and statutory Audit is one of them. It is an audit in which is legally required to be conducted by a business. This type of Audit is enforced by the statutes of law or is mandated by the law.
This type of Audit is usually done to help the public and all the findings are made public in the end. This helps the general public and the other investor of the company to make informed decisions regarding investments in the company. A Statutory audit can be most frequently seen in the public sector of a business. The Statutory Auditors are selected by the shareholders in a general meeting for a duration ranging from 3 years to 5 years.
What are the Advantages of Statutory Audit to a Business?
Statutory Audit is very important for a business as these audits have to be conducted by complying with the rules and regulations of the particular jurisdiction. This kind of audit helps in maintaining all the compliance requirements of the business. Apart from this, there are various other benefits of statutory Audit. These are as follows:
- As all the financial reports are examined by an auditor, they provide authenticity to the records of the business. This will also mean that it will better the credibility of the organization which will, in turn, increase the goodwill of the business.
- As all the reports of the business will be inspected, it will help the management to increase the productivity of the organization and provide a greater benefit to its investors.
- It will also help in a better understanding of the business activities and also improves the efficacy of the internal management system.
- It will lessen the fraud in the business and will increase the confidence of the investors and the government in the organization.
This is not an exhaustive list of all the advantages of statutory Audit and can be even expanded more. There can be many different ways by which a statutory auditor in the emirate can assist the businesses. To know more, you can refer to our blog titled "How do Emirate Auditors help in Statutory Audit?"
What is the 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 which have been shown in an infographic for easy understanding:
What is the Difference between a Regulatory Audit, Statutory Audit and Performance Audit?
We all know that there are different types of Audits, and each of these provides a different result. Here we will talk about the difference between Regulatory Audit, Statutory Audit and Performance Audit.
A Regulatory Audit is the Audit of a particular product to find out if the regulations of the particular sector are followed or not.
A Performance audit comprises of examining the various methods to increase the efficiency and efficacy of the particular business and deciding which method will be more effective.
A Statutory audit is the review of the financial statements of the business which have been mandated by the law or the statute of a jurisdiction.
We can see that all three different types of audits are aimed to provide assistance to the management by examining the process or procedures. But a major difference is that out of the three, only a Statutory Audit can be said as a comprehensive and complete audit. A regulatory audit will tell us about the product, whereas a performance audit will tell us about a process, but the statutory Audit will allow us to understand the entire organization.
Who can perform a Statutory Audit?
A statutory audit can be conducted by any business which fulfils particular prerequisites mentioned by the auditing authority. The management can also conduct a statutory Audit if it has been deemed mandatory by any authority or is mandated by a statute.
The primary purpose of a statutory audit is to examine if the particular organization provides a piece of complete and fair information about its finances. A statutory audit determines what the financial position of the business is and that there is no illegal or wrong activity being conducted in the business. It can be performed by any company which fulfils the required statutes or fulfils a condition.
What are the Statutory Audit Requirements?
A firm needs to have the following documents before getting a statutory audit started:
- Details of fixed assets, bank statements with details of transactions therein and the details of cash receipts & payments
- Information on secured and unsecured loans and advances Trade payables & receivables
- Local purchases & import purchases
- Local sales and export sales information
- Details of inventory, administration and selling expenses
- Details of foreign exchange earnings & expenditures
- Statutory dues & other levies
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?
As per the Commercial Companies Law, an audit is mandatory for all companies. But certain free zones have separate auditing requirements.
Is audit mandatory for branches of foreign companies?
It is mandatory for foreign companies to submit audited financial statements of the branch of foreign companies registered in the UAE every year.
Are there any requirements from any government departments other than the license issuing authority?
Other government authorities such as the Municipality, various Ministerial Departments, Insurance Authorities, etc. also demand companies to submit their audited financial statements as of and when required by such authorities.