Statutory Audit and Statutory Auditors:
Statutory Audit: The audits of a company as per the mandated laws and provisions are called as statutory audit. These are stated by and regulated by the statutes and necessary to hold. These are carried upon in order to give a fair and true review of the books of accounts, profits and losses declared by a company in a fiscal year. Statutory Audits are of two types namely; tax audits and company audits.
Statutory Auditors: To make a statutory audit happen or work the taxation department or the government appoints a person or group of persons who from the beginning till the end carry forward the audit. These people are called Statutory Auditors as they are being appointed by the rules and methods stated in the statute. The statutes have specific guidelines on who can and cannot be appointed as statutory auditors. The persons who can be appointed as statutory auditors are:
- Any practicing chartered accountant can be appointed as a statutory auditor for a company.
- Any chartered accountant firm can be appointed as statutory auditor.
The persons who cannot be appointed as statutory auditors are:
- Any corporate body other than a Limited Liability Partnership (LLP).
- Any person who is the employee of the company under the auditing.
- Any person who is relatives of the employee or the members of the board of directors.
- Any person who is in partnership in the company.
- Any chartered accountant or firm that is indebted to the company for more than Rs. 10,000.
- Any firm or persons having direct or indirect business with the company.
Appointing the Statutory Auditors for Statutory Audits:
Section 139 of the Companies Act, 2013 states the appointment of the statutory auditors for statutory audits. The auditors are appointed as per the two case mentioned below:
- In case of government companies /firms- The auditors are to be appointed by the Comptroller and Auditor General (C&AG) of India. The statutory auditor has to be appointed within 180 days of the commencement of the fiscal year. This appointment is to be held till the Annual General Meeting (AGM) is concluded.
- In case of non-government companies/firms- Such companies at the very first Annual General Meeting should appoint a chartered accountant or a whole CA firm as its auditor. The auditor appointed holds the office from the conclusion of the first AGM till the conclusion of the sixth AGM. Procedure or process of such an appointment is stated and prescribed by the Central Government.
Powers of a Statutory Auditor exercised during Statutory Audit:
A Statutory Auditor has powers that he can exercise during the commencement of the statutory audit. These are:
- Power to access the books of accounts of the company.
- Power to attend the general meetings of the company.
- Power to get information from the employees and officers of the company.
- Power to question the members or the staff of the company.
- Power to investigate in the company.
Duties of a Statutory Auditor in Statutory Audit:
With power comes the duty as well. A Statutory Auditor has certain duties that he/she has to fulfill-
- It is their duty to enquire that all the entries in the transactional books are correct or not.
- It is their duty to investigate about the nature and the type of the company.
- They have to enquire about the personal expenses, investments, loan and advances of the company and whether these have been properly treated in the accounts books.
- To check whether any entry is prejudicial or not.
Responsibilities/liabilities of the Statutory Auditor during the Statutory Audit:
The responsibilities or the liabilities of a Statutory Auditor are as follows-
- It is a basic responsibility of the auditor to report his/her opinions about the true and fairness of the books of accounts of a company.
- It is his/her duty to report any fraud.
- It is his/her duty to seek opinions on legal matters or managerial matters from experts to give a better detailed report of the company.
- The auditors have to plan the statutory audit in advance keeping in mind the scope and purpose of the audit.
- It is their sole responsibility to show professional behavior at all times.
- It is their responsibility to check all the departments have been audited or not.
- He/she shall maintain a record of each and every step and point during the audit.
- It is their key responsibility to make an audit report for the government departments and provide a copy of it to the company as well.