A Statutory Audit is an audit that is required by a governing body or law. The primary purpose of a statutory audit is to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records, and financial transactions. While the term “statutory audit” typically refers to an audit required by law, the specifics can vary depending on the jurisdiction and industry. Here are some types of statutory audits:
Different Types of Statutory Audit
Company Audit
They are conducted on all incorporated businesses to ensure compliance with the respective Companies Acts. It checks the accuracy and fairness of financial statements and ensures that they adhere to accounting standards.
Tax Audit
They are required for certain classes of individuals and entities to check the accuracy of their tax returns. In many jurisdictions, entities crossing a particular turnover threshold must have their accounts audited for tax purposes.
Bank Audit
This involves auditing the financial statements of banks. It also includes the examination of non-performing assets, loans, and advances and the verification of the bank’s investments.
Insurance Audit
Conducted on insurance companies to validate the claims settled during the year and ensure compliance with regulations of the insurance regulatory authority.
Government Audit
They are carried out for government departments and organizations to check the utilization of public money and ensure transparency and accountability.
Public Sector Undertaking (PSU) Audit
This audit is specific to public sector companies or enterprises. It ensures the efficient use of public resources and checks the financial statements and functioning of these organizations.
Stock Broker/Depository Participants Audit
This audit is specific to stock brokers and depository participants and ensures compliance with the regulations of the securities market regulator.
Cooperative Society Audit
They are carried out for cooperative societies to ensure the proper management of funds and adherence to cooperative principles.
Environment and Energy Audit
With increasing awareness of environmental issues, some jurisdictions may require companies to undergo an audit to ensure they comply with environmental laws and regulations.
Forensic Audit
While not always statutory, in some cases, regulators might mandate a forensic audit if there are suspicions of fraud or financial discrepancies.
The applicability and requirements of each type of statutory audit vary by country and region, as they are based on local laws and regulations. Organizations and professionals must be aware of the statutory audit requirements in their jurisdiction.