What is Statutory Audit?
As its name indicates, statutory audit is that audit which has been made compulsory by the statute therefore, law. For example, audit has been made compulsory by the Companies ACE for companies to protect arid safeguard the interests of the shareholders of the company. These share holders are the owners of the company but they do not manage the day-to-day affairs of the company themselves.
The shareholders elect the directors who manage the affairs of the company on their behalf. Besides, the employers of the company carry out the orders and policies laid down by the directors of the company. In order to ensure that the accounts as prepared by the officers and directors of the company show a true and fair view of the financial position of the company, it is necessary to check or audit those accounts.
Statutory audit is conducted with the object of checking the accuracy of accounts of a company, mainly in organisations where ozoner9hip and management is separate.
Statutory audit has been prescribed for the following:
- Companies registered under the Companies Act.
- Government companies.
- Corporations established by Parliament or State Legislatures.
- Banking companies governed by the Banking Regulation Act, 1949.
- Electricity supply companies governed by the Electricity Supply Act 1948.
- Co-operative Societies registered under Co-operative Societies Act.
- Societies registered under the Societies Registered Act, 1860.
- Public and other chat liable trust registered under the Trusts Act,1882.
Salient Features of Statutory Audit
- Statutory audit has been made compulsory bylaw.
- Its scope is also determined by the law. As such its scope cannot be restricted. However, it can be extended by a separate agreement.
- The Companies Act, 1956 has prescribed qualifications for a statutory auditor. He must be Characterized Accountant within the meaning of the Chartered Accountants Act, 1949.
- Similarly the law has also laid down the rights, duties and liabilities of the statutory auditor.
- A statutory audit is of independent nature. As such the statutory auditor is required to submit his report to the shareholders.