What is a Statutory Audit?
A Statutory Audit is a legally required examination of a company’s financial statements and records to ensure accuracy and compliance with applicable laws and regulations. Statutory audits are typically conducted by independent certified public accountants (CPAs) or audit firms who are registered with relevant regulatory bodies. The objective of a statutory audit is to provide assurance to stakeholders, such as shareholders, creditors, and regulatory authorities, regarding the company’s financial health, integrity, and compliance with statutory requirements.
Key Characteristics of Statutory Audit:
- Legal Requirement: Statutory audits are mandated by law or regulation. They are typically required for certain types of entities, such as public companies, large private companies, or entities receiving government funding.
- Independence: The audit is conducted by an independent, external auditor who is not affiliated with the company being audited. This independence ensures objectivity and impartiality in the audit process.
- Objective: The primary objective of a statutory audit is to provide assurance to stakeholders, such as shareholders, creditors, and regulatory authorities, regarding the accuracy and reliability of the company’s financial statements.
Difference between Statutory Audit and Tax Audit
“Statutory Audit” and “Tax Audit” are two essential types of audits that any company must go through. While both audits involve the examination of financial records, their objectives, scopes, and the entities involved differ significantly. Statutory audits focus on financial statement accuracy and compliance with accounting standards, while tax audits focus on tax compliance and the correct calculation of taxes owed by the taxpayer.