TheTaxHeaven Dictionary - Know the meaning of tax

Statutory Audit

What is Statutory Audit? 

A statutory audit is a legally required review of a company's financial statements. It includes an examination of bank accounts, board of directors list, financial transactions, income and expenses, tax savings, calculations, and other accounting records. 

Its main aim is to ensure that the company's financial records are accurate. If there's any misconduct found during the audit, it indicates misappropriation of funds. 

How Statutory Audit Functions? 

Not all entities undergo a statutory audit, only selected ones like banks, government corporations, insurance companies, and brokerage houses. Statutory Audit is a regulation by the judiciary. It includes laws made by the central or state government. 

All types of companies, Limited Liability Partnerships (LLP), and Proprietorships must also do statutory audits under certain conditions. 

Advantages of the Statutory Audit 

  • Offers credibility
  • Ensures compliance
  • Improves financial planning and budgeting
  • Prevents fraud
  • Confirms authenticity of financial statements
  • Facilitates loan accessibility
  • Reduces risk for companies