What is statutory audit?
A statutory audit, also known as financial audit is one of the main types of the audits in the business sector. It’s carried out as per the statutes applicable to the entity. The primary motive of the statutory audit is to gather all the relevant information following which the auditor gives his/her opinion on the fair and true financial position. The auditor gives the opinion independently, without being biased or influenced by any factor or manner. The auditor prepares an audit report to give the free and fair opinion. The stakeholders may completely rely on the financial statements. Since, the accounts are audited and authentic, not only stakeholders, but shareholders also get benefitted as depending on these statements, they can take their calls.
Benefits of statutory audit
Statutory audit increases the authentity and the credibility of the financial statements of the concerning enterprise. The auditor is an independent entity and verifies the financial statements of the company. This also highlights that the management has given due importance and care while delivering the final financial statements. The auditor also puts remarks on the strengths of the internal control within the organization, besides commenting on the different departments within the organization. The auditor suggests the areas, where internal control is weak and needs to be solidify. Such weaker regions are always prone to risk and an auditor underlines such red zones. It helps improving the overall performance as the company mitigates the risks.
How small companies can be benefitted?
The statutory audit is beneficial for small companies for which audit might not be applicable. The financial statements of such companies get more value, as it becomes easier for them to get bank loans and other types of facilities. Since the financial statements are audited by an independent auditor, they’re more reliable and authentic. When such companies produce audited financial statements, the banks keep their case on priority.
Involved cost, an important factor
The cost involved in the statutory auditing may be high, but if the firm is already looking after your accounts, then the involved cost is relatively very low. The audits have to be done in the set time frame and remember that auditors are the watchdogs and not the bloodhounds. There are many areas, wherein the auditors are left with no option but to take the representation from the management. The management needs to be honest for the accurate statutory auditing in such cases.