What is a Statutory Audit?
A statutory audit is a mandatory audit of a company’s financial records by an external entity. This audit is mandated by statute or law that governs an organization’s principles and ethics.
In general, a statutory audit is conducted by examining bank accounts, financial statements, transactions, bookkeeping records, ledgers, and other critical documents that are submitted for tax purposes and Govt requirements.
But it can also include business operations-related documents such as invoices, purchase orders, bills, challans, and more.
Importance of Statutory Audit
As per Companies Act 2013 and Companies (Audit and Auditors) Rules, 2014, all public and private limited companies are mandated by law (or stature) to conduct a statutory audit of the financial documents and filings. In fact, the business turnover and the nature of the business of public and private limited companies don’t matter in the case of the statutory audit.
In the case of LLP (Limited Liability Partnership) firms, only these companies are mandated to perform the statutory audit:
- Annual turnover crosses Rs 40 lakh or
- Capital contribution is more than Rs 25 lakh
In the case of non-compliance of statutory audit, Govt can impose a fine between Rs 25,000 to Rs 5,00,000. The defaulting officer can be imprisoned for one year and imposed a penalty between Rs 10,000 to Rs 1,00,000 or both.