A statutory audit is an audit that is conducted in accordance to the requirement of specific government agencies or regulating bodies of the industry that the business is under. The main objective of a statutory audit is to provide a clear assessment of the controls and operational environment of a certain company.
A statutory audit is conducted by making an assessment of the operational environment of the company. This part of the process of a statutory audit is to assess the operational practices of the company. This assessment should be conducted to determine if the operational practices of the company coincides with the guidelines of the industry and other regulatory bodies. The statutory audit should be able to determine if the operational practices of the company are ethical or not. This is determined by the auditor through surveys, questionnaires, notifications and checklists. The auditor conducting the statutory audit may also question the employees about certain company policies, tasks, procedures or departments that are part of the audit.
The next step in the statutory audit process is to assess the controls of the company. This is usually done by questioning the consultants, external auditors and employees of the company. To give a more precise audit, the auditor will also review the previous audit reports, working papers and company publications. Once the auditor understands the controls of the company, he will then conduct a test to determine if they are in accordance with the practices and standards set by the industry regulating bodies. The auditor also makes sure that the company’s controls are effective and clearly understood by all of the employees.
After the company controls are assessed and tested, the auditor will then conduct a testing of the account balances. Account balances are tested in a statutory audit to make sure that the financial reports are accurate and in compliance with the industry standards, principles and practices. To make a thorough testing of the account balances, the auditor conducting the statutory audit also looks into the balance sheets of the company as well as their statement of profits and losses, cash flow and the equity of shareholders. This is to make sure that all the details presented in the company’s internal audit are correct and free from any errors. Any errors in the information or declaration stated in the financial statement of a company can lead to serious repercussions so accuracy is very important.
Do you have the ability to leverage risk assessments and ratings in developing your audit program? At Moore Stephens, our goal is to add commercial value through all of our services – and that includes statutory audit and internal audit and understand the need to provide advice to help our clients to develop their business. And here you can read my other articles on Mike Bryson’s articles and my bookmarks on Mike Bryson’s bookmarks.