A statutory audit focuses on the entire financial statements of a company to provide an independent opinion on their accuracy and fairness. In contrast, a tax audit focuses on verifying the correctness of income, expenses, and deductions claimed in the tax return. People often confuse the terms “Tax Audit” and “Statutory Audit.” A tax audit involves examining a company’s accounts to determine whether it operates within legal limits, and it is conducted by an auditor under the Income Tax Act. On the other hand, a statutory audit is carried out under the Companies Act 2013 or any other applicable statute.
Statutory audit increases the confidence of stakeholders, Lenders, and prospective suppliers in the accuracy and reliability of the financial information.
The information as the result of a statutory audit can be used to make informed decisions about the future of an organization. This information can help organizations to identify areas where they need to improve, and make informed decisions about investments, budgets, and other strategic initiatives.
A statutory audit can identify weaknesses in an organization’s internal control systems, and provide recommendations for improvement. This can help organizations to improve their overall operations and reduce the risk of fraud and mismanagement.
The statutory audit can identify potential risks and provide recommendations to mitigate these risks. This can help organizations to reduce the impact of risks and improve their overall risk management processes.
One of the biggest challenges in conducting a statutory audit is the availability of records and information. Organizations must ensure that all relevant records and information are available for the auditor to examine, in a timely and complete manner, to avoid delays in the audit process.
The relevance of records and information is also critical, as the auditor must be able to determine the accuracy and reliability of the information provided.
Organizations must ensure that the records and information provided are reliable so that the auditor can make an accurate assessment of the financial information.
A statutory audit ensures that a company’s financial statements are prepared as per the financial reporting framework and are in compliance with all rules and regulations applicable.
