Statutory Audit & Reporting: Definition and Example

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Pratibha Devasenapathy | Jan-13-2020

Statutory audit is nothing but a financial audit which is to be performed by every functioning company irrespective of the size. The statutory audit will help the stakeholders to rely on financial statements. Stakeholders other than shareholders also reap benefits from the statutory audit as they can take crucial business decisions. From the accuracy to the authenticity of the company’s spends, an auditor is responsible to check all the information and share his impartial views.

The purpose of a statutory audit is to ensure that these accounts of the company paint a fair and accurate picture of the company’s current financial position on the date of the balance sheet.

Process to Conduct a Statutory Report

There is a certain time frame within which all statutory auditors have to undertake the audit of the branches that are allotted to them. An auditor should immediately accept the appointment, send a formal communication to the branch management and all other information that he would require in his audit.

The auditor will have to ensure that their report should include the quantification of advances, deposits, interest income and interest expenses. The important elements to check in the statutory audit of banks are:

Process to Conduct a Statutory Report

After conducting a thorough audit, an audit report has to be submitted by the auditor stating the following:

  • Whether the balance sheet is showing true and fair view with all the necessary particulars 
  • Whether the profit and loss account shows a true balance for the period covered by such account
  • Whether any transaction has been carried by the branch which was not within the powers of the branch
  • Any other matter which the auditor considers to be brought to the notice of the Statutory Central Auditor

Contents of an Audit Report

The basic structure of an audit report as prescribed by the Standards on Auditing is as follows:

Heading

Brief of contents

Title

Title should mention that it is an ‘Independent Auditor’s Report’.

Addressee

Should mention clearly as to whom the report is being given to.

Management’s Responsibility for Financial Statements

 

Auditor’s Responsibility

Mention that responsibility of the Auditor is to express an unbiased opinion on the financial statements and issue an audit report.

Opinion

Should mention the overall impression obtained from the audit of financial statements.
For example Modified Opinion, Unmodified Opinion

Basis of the Opinion

State the basis on which the opinion as reported has been achieved. Facts of the basis should be mentioned.

Other Reporting Responsibility

If any other reporting responsibility exists, the same should be mentioned.
For example Report on Legal or Regulatory requirements

Signature of the Auditor

The engagement partner (auditor) shall sign the audit report.

Place of Signature

The city in which audit report is signed.

Date of Audit Report

Date on which the audit report is signed.

Examples of Statutory Reports

The following are the examples of statutory report

  • Statutory Report submitted at the statutory meeting of the company
  • Directors’ Report to the Annual General Meeting
  • Annual Return
  • Auditors’ Report
  • Reports by Inspectors appointed to investigate the affairs of the company

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