A statutory audit is a legally required review of a company’s financial statements and records to ensure accuracy and compliance with accounting standards and laws.
The purpose is to provide an independent opinion on whether the financial statements present a true and fair view of the organisation’s financial position.
Explanation of Statutory Audit
The Statutory audit Meaning refers to the mandatory examination of books of accounts and financial reports by an external auditor appointed as per the law.
It acts as a safeguard for stakeholders such as investors, government authorities and creditors by ensuring transparency and accountability in financial reporting.
Statutory Audit in India
The process of statutory audit in India is governed by the Companies Act, 2013. Every registered company (private or public) is required to conduct an annual statutory audit by appointing a qualified Chartered Accountant.
Key points include:
- Auditors must be independent and not involved in company management.
- The auditor’s report is submitted to shareholders and the Registrar of Companies (ROC).
- The process ensures adherence to legal and accounting frameworks.
Statutory Audit Limit and Applicability
The statutory audit applicability and limit depend on business type and financial thresholds:
- For Companies: Mandatory for all, irrespective of turnover.
- For LLPs and Partnership Firms:
- Audit required if turnover exceeds ₹40 lakh, or
- Capital contribution exceeds ₹25 lakh.
For example, if an Indian private limited company records an annual turnover of ₹1 crore, it must conduct a statutory audit and submit its audited financial statements to the Registrar of Companies.
The audit helps ensure that the company’s operations comply with legal and financial regulations.In essence, a statutory audit enhances transparency and ensures that financial reporting adheres to legal requirements.
