Statutory Audit
A Statutory Audit is a legally mandated audit of an entity’s financial statements, conducted by an independent Chartered Accountant (CA) under statutory laws. In India, statutory audits are primarily governed by the Companies Act, 2013, and may also be required under the Income Tax Act, 1961, LLP Act, 2008, and sector-specific regulations (e.g., Banking, Insurance, NBFCs).
Audit of Financial Statements includes: -
- Examination and verification of:
- Balance Sheet
- Profit & Loss Account
- Cash Flow Statement (if applicable)
- Notes to Accounts
- Ensures compliance with:
- Indian Accounting Standards (Ind AS) or Accounting Standards (AS)
- Verification of Books of Accounts which included scrutiny of:
- General Ledger
- Journals and vouchers
- Bank reconciliation statements
- Sales and purchase registers
- Fixed asset register
- Debtors/creditors ledgers and inventories
- Compliance with Statutory Laws:
- Audit checks to ensure adherence to:
- Companies Act, 2013
- Income Tax Act, 1961
- GST Act
- FEMA, where applicable
- Labour laws, industry-specific laws, etc
- Audit of Statutory Dues:
- Audit of Statutory Dues
- GST, TDS, Advance Tax payments
- Provident Fund (PF), ESIC, Professional Tax
- Timely filings and reconciliations with statutory records
- Verification of Related Party Transactions:
- Disclosure in financials and audit report
- Compliance with Section 188 of the Companies Act
- Arm’s length pricing, Board/Shareholder approvals (where required)
- Audit of Share Capital & Reserves:
- Issue and allotment of shares
- Transfer and buy-back
- Dividend declaration and payment
- Bonus issue, rights issue (if any)
- Reporting under CARO (if applicable):
- Companies Auditor’s Report Order (CARO) provides additional reporting requirements like:
- Inventory and fixed asset records
- Loans to related parties
- Fraud reporting
- Default in statutory dues
- Internal audit system
- Audit of Consolidated Financial Statements (CFS):
- If the company has subsidiaries, joint ventures, or associates, the audit also includes:
- Verification of inter-company transactions
- Consolidation process and elimination of intra-group items
- Audit Opinion and Reporting:
- Final Audit Report issued under Section 143 of Companies Act
- Reporting on fraud, internal controls, and statutory non-compliances (if any)
- Reporting on fraud, internal controls, and statutory non-compliances (if any)
- Audit opinion:
- Unqualified (clean)
- Qualified
- Disclaimer
- Adverse
Deliverables
- Independent Auditor’s Report (Main Deliverable)
- CARO Report (If Applicable)
- Annexures to Audit Report
- Finalized Financial Statements (Reviewed and Approved)