It is mandatory for businesses to conduct statutory audit which is significantly different from GST and other regular audits. This audit is performed with a specific objective. The auditor will need particular documents to conduct such an audit. The list of documents required for any statutory audit includes and is not limited to invoices of sales, expenses, purchases during the year including credit card statements of directors if payments of companies are made through it, on behalf of company, bank statements, copy of Vat, service tax returns, TDS returns, documentary evidences of appointing and reappointing an auditor and audited balance sheet of previous year.
The process involved
The process of conducting a statutory audit in India involves proper documentation of all papers and files. The auditor then focuses on the nature of the business and its evaluation with different tools and methods. Proper selection is made regarding the audit process. The next stage involves proper follow ups of all the bills and documents gathered to find out compliance and noting down the areas that need amendments. The last and most important process is the preparation of the report of the statutory audit and presenting it to the relevant authority.
The key objective
The audit is conducted just to ensure that all financial statement and documents of the company are in order such as the profit and loss account, balance sheet and others. These documents must show the true state of the finance of the company as well as provide a fair view of its different affairs and business activities. Everything must be in accordance and compliance with the Company’s Act mandatorily for all registered companies. Ideally, a statutory audit looks into the statutory areas that include service tax, ESI, VAT, Provident fund and several others. The audit makes sure that the statements and documents are free from any errors and material misstatements.
Auditing different documents
The balance sheet is the most important document that is scrutinized precisely by the top audit companies in India without overlooking the other statements in the process. The auditor makes sure that there are proper and self-explanatory breakups of each sale and services in the profit and loss account. Apart from that, checks are made that all statutory dues such as excise duties, VAT and service tax are accounted for properly with the due dates. For purchase verifications, the auditors focus more on delivery dates and whether or not VAT has been accounted for these separately in a VAT input tax credit account.
Share capital and other audits
The auditor will also scrutinize the share capital of the company to find out whether or not any resolution was passed for increasing the share capital and the number of such shares issued. Proper authorization of such changes in share capital must be recorded as well. In case of any secured loans of the company, the auditor checks whether such loans are issued after proper sanction, and there is a written representation and confirmation of balances from the banks. There must be adequate disclosure of secured as well as unsecured loans with substantial evidence and proofs.
Ensuring statutory compliances
The auditor of the best audit firms in India will ensure that your company is statutory compliant. Professional tax is another area that they will look into as required by the law. A statutory auditor is usually hired by the accounting committee designated by the Board of Directors or may be employed directly as well. It is rather unlikely that the management of the company will hire a statutory auditor for this purpose. Statutory audit is even required for branch offices that a company may have.