Checklist for Statutory Audit | Who should have Statutory Audit Checklist

A Detailed Guide: Statutory Audit Checklist

Introduction to Statutory Audit Checklist:

A statutory audit checklist is all the documents required during each and every stage of statutory audit. A statutory audit means an audit mandated and regulated by the laws and statute. Thus, the statutory audit checklist is also mandated by the statute. This checklist has to be thoroughly followed in order to have a smooth statutory audit procedure. Banks, brokerage businesses and insurance companies must provide with a detailed statutory audit at the end of a fiscal year. Content in the statutory audit checklist depends upon the type of organization that means every company has different points in the statutory audit checklist according to the nature of its operation or work.

Areas on Which Statutory Audit Checklist is Based:

A statutory audit checklist however is always based on the statutes and provisions related to audits in India but there are four main areas on the basis of which a statutory audit checklist has to be made-

  • Cash flow in the organization.
  • Stocks
  • Receivable items
  • Statutory records and requirements and payables

Elements to Be Checked Under a Statutory Audit Checklist:

  1. A balance sheet inclusive of-
  •  (a) Details regarding shared capital.
  •  (b) Details of share application money.                                                                                  
  •  (c) Details of secured loans including latest bank statements, bank reconciliation statements and sanctioned letters confirming the rate of interest on the loan.
  •  (d) Details of unsecured loans including statements showing acceptance of loan, rate of interest confirmation letter, ledger copies from the books of the loan provider. 
  •  (e) Details of current liabilities and provisions including confirmation copies of the closing balances, detailed break-up of the sundry creditors, ledger copies of parties book, detailed notes on the creditors written-off, list of parties to be written-off, detailed provisions standing in the books 
  •  (f)  Details of dues and returns including copies of TDS paid, TCS paid, VAT paid, Sales Tax paid, excise duty paid, provident fund payable, professional tax paid etc., copies of challans.
  •  (g) Details of fixed assets including copies of invoices showing any addition to the Assets, books showing depreciation working, list of assets not yet accounted in the books.
  •  (h) Details of inventories including statements showing valuation of closing stocks, statement of reconciliation and excise records, details of quantity of production and sales on daily basis, input and output ratio of the raw material.
  • (i) Details of investments including list of investment, date of investment and amount of investment made in a year, nature of investment, investments sold in the year.
  • (j) Details of current assets including list of sundry debtors, cash and bank balance details, details of deposits etc., profit and loss account details etc.
  1. Statutory records like updated statutory records and statutory register kept by the organization, copies of the general and board body meetings and copies of forms filled if new charges are formed by the company.

Checklist for Statutory Audit:

Since the statutory audit checklist differs from organization to organization, here are the common points are included in any statutory audit checklist of any company that are liable to have a statutory audit.

  • Research related to the controlled environment of the organization- every organization has control environment either through regulatory guidelines or initiatives of the competitor or economic trends taking place in the country or at the international level. These elements show the competitive strategy or the stand of the company in the market. Every statutory auditor researches on these elements to know more about the controlled environment of the business.
  • Testing the internal controls of the organization- the auditor always tests the internal controls in the organization to know there efficiency and adequacy. The auditor test these in order to ensure there compliance with guidelines given in the statutes.
  • Ranking the controls and risks of the organization- the auditor has to rank the control and risks from high to low. This is done to let the entity know which control measures are effective in providing remedies in order to curb any internal breakdowns.

Issuance of the final report- the auditor has to issue a detailed report on his her assessment for future references and to make the management work more effectively and efficiently.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.