Statutory Audit

A statutory audit is an independent examination of the financial records of an organization, required by law. This audit is conducted to ensure that the financial statements of the organization give a true and fair view of its financial position and performance, in compliance with applicable laws and accounting standards.

Here’s a breakdown of the key aspects of a statutory audit:

1. Legal Requirement: A statutory audit is typically mandated by government or regulatory authorities. In many countries, companies of a certain size or public interest entities (such as listed companies, banks, and insurance companies) are required to have their financial statements audited annually by an external auditor.
• Purpose: The purpose of a statutory audit is to provide assurance to shareholders, creditors, investors, and other stakeholders that the company's financial statements are accurate and comply with the relevant financial reporting framework (e.g., International Financial Reporting Standards, Generally Accepted Accounting Principles).
• Audit Process: Planning: The auditor plans the audit process by understanding the business, internal controls, and financial risks.
2. Fieldwork: The auditor tests the financial records, performs procedures to verify accuracy, and assesses internal controls.
• Reporting: The auditor issues an audit opinion based on the audit's findings. The report can be:
• Unqualified Opinion: The financial statements are free from material misstatements.
• Unqualified Opinion: The financial statements are free from material misstatements.
• Adverse Opinion: The financial statements do not provide a true and fair view.
• Disclaimer of Opinion: The auditor was unable to obtain sufficient evidence to form an opinion.
• Audit Standards: Audits are carried out according to established auditing standards such as the International Standards on Auditing (ISA) or national standards like the Generally Accepted Auditing Standards (GAAS).