Statutory Audit
Statutory Audit Services
At Whytax, we provide comprehensive Statutory Audit Services that ensure compliance, accuracy, and transparency in financial reporting, as mandated under the Companies Act, 2013. Our team of experienced Chartered Accountants and audit professionals adhere to the highest standards of auditing practices to provide independent assurance on your financial statements.
Introduction to Statutory Audit
A Statutory Audit is a legally mandated review of the accuracy of a company's financial statements and records. It is conducted to ensure that financial reporting is true and fair, and complies with the applicable laws and regulations. The audit is conducted by an independent auditor, as required by statute, usually the Companies Act, 2013 in India.
Statutory Audit under the Companies Act, 2013
Under the Companies Act, 2013, every company registered in India (except for certain exemptions) is required to have its financial statements audited annually by a qualified Chartered Accountant or a firm of CAs. Key provisions include:
• Section 139: Appointment of auditors
• Section 143: Powers and duties of auditors
• Section 134: Financial statement approval and signing
• Audit Report: Must be presented to the shareholders and filed with the Registrar of Companies (ROC)
Is Statutory Audit Compulsory for All Companies?
Yes, statutory audit is compulsory for all companies, including:
• Private Limited Companies • Public Limited Companies • One Person Companies (OPCs) • Limited Liability Partnerships (LLPs) with turnover above ₹40 lakhs or contribution over ₹25 lakhs
Key Points About Statutory Audit
• Conducted annually as per statutory requirements
• Mandatory for all companies except certain private companies with low turnover
• Needs to be carried out by an independent Chartered Accountant
• Report must be submitted to ROC and other regulatory authorities
Statutory Audit Applicability (Quick View)
| Entity Type | Audit Requirement |
|---|---|
| Private/Public Companies | Mandatory regardless of turnover |
| OPC | Mandatory |
| LLPs | If turnover > ₹40 lakhs or contribution > ₹25 lakhs |
| Trusts & Societies | If required under governing law/bylaws |
Scope of Statutory Audit
Our statutory audit services encompass:
• Verification of books of accounts
• Review of financial statements and supporting schedules
• Evaluation of internal control systems
• Ensuring compliance with accounting standards (Ind AS/AS)
• Verification of statutory dues and liabilities
• Issuance of the audit report with observations and recommendations
Aspects Covered in the Statutory Audit
• Examination of Trial Balance, Profit & Loss Account, Balance Sheet
• Scrutiny of income, expenses, assets, liabilities
• Verification of Bank Reconciliations and Fixed Asset Registers
• Review of Board Resolutions, Minutes, and Statutory Registers
• Compliance with GST, TDS, PF, ESI, etc.
• Checking of loans, advances, and related party transactions
• Verification of capital structure and shareholding pattern
| Feature | Statutory Audit | Tax Audit |
|---|---|---|
| Governing Law | Companies Act, 2013 | Income Tax Act, 1961 |
| Applicability | Applicable to companies & LLPs | Applicable based on turnover/professional receipts |
| Purpose | To ensure compliance with company laws | To ensure compliance with income tax laws |
| Form | Audit Report in prescribed format (CARO, etc.) | Form 3CA/3CB and 3CD |
| Audit Authority | MCA (Ministry of Corporate Affairs) | Income Tax Department |
Our Complete Statutory Audit Process
We follow a structured and risk-based audit approach:
1.Planning & Understanding
– Understanding business operations, risks, and internal controls
2.Preliminary Review
– Review of past audit reports, management practices, and compliance status
3.Fieldwork & Evidence Collection
– Examination of financial records, transaction testing, compliance checks
4.Analysis & Findings
– Identification of material misstatements or irregularities
5.Reporting & Recommendations
– Issuance of statutory audit report with observations and suggestions
6.Post-Audit Support
– Addressing audit queries and ROC/Stakeholder submissions
(FAQs) – Statutory Audit Services
1. Who is eligible to conduct a statutory audit?
Only a Chartered Accountant (individual or firm) holding a valid certificate of practice from ICAI (Institute of Chartered Accountants of India) is authorized to conduct statutory audits in India.
2. When should a statutory audit be completed?
The statutory audit should be completed before the company files its financial statements with the Registrar of Companies (ROC), typically within 6 months from the end of the financial year.
3. What is included in the audit report?
The statutory audit report includes the auditor’s opinion on the financial statements, remarks on internal control systems, compliance issues (if any), and disclosures required under the Companies Act and applicable auditing standards.
4. How long does a statutory audit usually take?
The duration of a statutory audit depends on the size and complexity of the business, but typically ranges from 2 to 6 weeks, including planning, fieldwork, reporting, and review stages.
5. Do startups or newly incorporated companies require a statutory audit?
Yes. All companies, regardless of size or years of operation, must undergo a statutory audit annually, starting from the year of incorporation.
6. How is the auditor appointed and for how long?
An auditor is appointed by the shareholders in the Annual General Meeting (AGM) and usually holds office for a term of 5 years, subject to ratification at every AGM (as per earlier provisions).
7. Can the same auditor be reappointed after 5 years?
For listed and certain classes of public companies, mandatory rotation of auditors is required after 5 years, as per Section 139(2) of the Companies Act, 2013. This does not apply to small private companies.
8: What is CARO and does it apply to all companies?
CARO (Companies Auditor’s Report Order) is an additional reporting requirement applicable to certain companies. It includes detailed reporting on fixed assets, inventory, loans, statutory dues, etc. It does not apply to small companies or OPCs under certain thresholds.
9: What is the auditor’s responsibility regarding fraud detection?
As per SA 240 (Auditing Standard), the auditor is responsible for assessing the risk of material misstatements due to fraud and obtaining sufficient audit evidence. However, the primary responsibility for fraud prevention lies with the company’s management and those charged with governance.
10: What is Form AOC-4 and how is it related to statutory audit?
Form AOC-4 is a mandatory filing with the Registrar of Companies (ROC) under the Companies Act. It includes audited financial statements, auditor’s report, Board’s report, and other annexures. It must be filed within 30 days of the AGM.
11: Can the statutory auditor refuse to sign the audit report?
Yes. If the auditor believes the financial statements:
• Are misleading
• Contain material misstatements
• Lack supporting evidence
They can refuse to sign or issue a qualified, adverse, or disclaimer opinion in the audit report.
12: What is the audit trail requirement under Companies Act, 2013?
From April 1, 2023, companies must maintain accounting software with a proper audit trail (edit log) feature that:
• Captures each transaction change
• Prevents editing/deletion without record
Auditors are required to report on this compliance in the audit report.
13: What is included in the Notes to Accounts in the audit report?
Notes to Accounts disclose additional information such as:
• Accounting policies
• Contingent liabilities
• Related party transactions
• Segment reporting
These are critical for stakeholders to interpret the financial results correctly.
14: Can the statutory auditor provide other services to the company?
As per Section 144 of the Companies Act, 2013, statutory auditors are prohibited from providing certain non-audit services (like accounting, internal audit, investment advisory, etc.) to maintain independence.
