Statutory Audit: Requirements, Process and Compliance Guide#
What is Statutory Audit?#
Statutory audit is a mandatory audit required by law for certain entities under various statutes.
Who Needs Statutory Audit?#
Companies Act, 2013:#
- All companies (unless exempt)
- Turnover > Rs 40 crore: Statutory audit
- Borrowings > Rs 10 crore: Statutory audit
Other Laws:#
- Banking companies
- Insurance companies
- Non-banking financial companies
Appointment of Auditor#
- First auditor within 30 days of incorporation
- Subsequent auditor by AGM
- Rotation every 5 years (for listed companies)
- Appointment by Board/AGM
Audit Process#
Planning:#
- Understand business
- Assess risk
- Plan audit procedures
Execution:#
- Verification of transactions
- Substantive testing
- Analytical procedures
Reporting:#
- Audit opinion -CARO report (for specified companies)
- Internal controls report
Key Documents#
- Financial statements
- Books of accounts
- Bank statements
- Invoices and bills
- Contracts and agreements
Types of Audit Opinions#
| Opinion | Meaning |
|---|---|
| Unqualified | Fair presentation |
| Qualified | Except for certain items |
| Adverse | Not fairly presented |
| Disclaimer | Unable to form opinion |