Statutory Audit

Statutory Audit is another name of a Financial Audit. It is essentially an audit of the final statements of a company, i.e. the profit and loss and the balance sheet. The purpose of a Statutory Audit is to ensure that these accounts of the company represent a fair and accurate picture of the company’s current financial position on the date of the balance sheet.

It is important that we understand the need for a Statutory Audit to be carried out. In case of a company, the owners of the company are the shareholders. However, they do not run or manage the day to day affairs of the company. This is done by the board of directors and the management of the company.

So the shareholders need assurance that the accounts maintained and published by the company are authentic and genuine. This is why the law requires that an independent auditor to conduct a Statutory Audit.

The independent auditor has full authority to check the financial records of the company and publish his findings via an auditor’s report. The shareholders and owners of the enterprise can then be assured of the authenticity and reliability of the financial statements.

Other stakeholders like creditors, employees, potential investors etc also benefit from the Statutory Audit. They too can base their decisions on these accounts, since they are authentic.

Tax Audit

A Tax Audit is an audit, made compulsory by the Income Tax Act, if the annual gross turnover/receipts of the Assessee exceed the specified limit. Tax audit is conducted in Sec 44AB of the Income Tax Act,1961 by a Chartered Accountant.

-Simply Tax Audit means, an audit of matters related to tax.

Applicability:

The Following persons need to be liable for tax audit U/s 44AB

• Business: Limit – Rs. 1 Crore
• Profession: Limit – Rs. 50 Lakh
• Presumptive Taxation Scheme – Sec 44AD
• Businesses, whose annual gross turnover/receipt does not exceeds Rs. 2 Crore are eligible for this scheme.
• Presumptive Taxation Scheme – Sec 44ADA
• Professions, whose annual gross receipt does not exceeds Rs. 50 Lakhs are eligible for this scheme.

Internal Audit

Definition

Preface to the Standards on Internal Audit issued by ICAI defines “Internal Audit” as follows: “An independent management function, which involves a continuous and critical appraisal of the functioning of an entity with a view to suggest improvements thereto and add value to and strengthen the overall governance mechanism of the entity, including the entity’s strategic risk management and internal control system”.

In simple terms – It is a way of ensuring businesses and public sector organizations use resources efficiently and apply process consistently. Internal auditors assist management with this task by providing a focus on risk management and the implementation of more stringent internal controls to manage prospective risks and vulnerabilities.

Need for Internal Audit

• Increased size and complexity of businesses
• Enhanced compliance requirements
• Focus on risk management – understand risk exposure and internal controls to manage such risks
• Intensive use of information technology
• Need to create greater transparency, establish sound corporate governance

GST Audit

GST Audit will apply every year for those GST registered business (GSTIN) having turnover more than Rs 2 crores, by the sale of goods or services in the financial year.

Turnover-based Audit under Section 35(5) of CGST Act:

If the annual turnover of a registered taxpayer is more than Rs. 2 crores, in a financial year, he is required to get his accounts audited by a Chartered Accountant or Cost Accountant every year.

The total turnover calculation must be PAN-based, which means that once the turnover under the PAN is more than Rs. 2 crores, all business entities registered under GST for that PAN will be liable for GST audit for a financial year.

Bank Statutory Audit

What are Statutory Audits of Banks?

The audits that are carried out to check that the accounts and financial statements presented to the individuals as well as the Income Tax Department are fair and correct. It is mandatory by the Income Tax Department and other banks of a high order to conduct these audits regularly. The RBI (Reserve Bank of India) along with the ICAI appoints qualified Chartered Accountants also called the Statutory Auditors. These audits are conducted rigorously for every branch of a bank at the end of the financial year.

Process of Statutory Audit:

While issuing the reports, the auditors ensure that these reports follow the essential requirements and standards which include:

• SA (Standard of Auditing) 700: An opinion is formed, along with which the financial statements are reported.
• SA (Standard of Auditing) 705: On the report provided by the Auditor, various opinions regarding the modifications are offered.
• And SA (Standard of Auditing) 706: In the report provided by the Auditor, the emphasis is laid on matter paragraphs and others.

All these audits have to be conducted within a given time by the appointed auditors. The auditors intimate the banks in prior for the same along with sending the details of the information that they would require during the audits.