A Complete Guide on Professional Statutory Audit

As the name suggests, statutory audit is that audit that has been made compulsory by the law. A Professional Statutory Audit is mainly conducted to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records and financial transactions.


Statute audit has been made compulsory by the Companies ACE for several companies to protect and safeguard the interests of the shareholders of the company. In order to ensure that the accounts prepared by the directors of the company reflect a fair view of the financial position of the company, it is necessary to check or audit those accounts.

This audit is conducted in accordance with the provisions of any Act or Statute as laid down by the Government. It may be both financial audit and cost audit. Such audit of the accounts of the Government departments and statutory bodies is conducted by the representative of the Comptroller and Auditor General of India.

Statutory audit has been prescribed for the following:
  • Companies registered under the Companies Act.
  • Government companies
  • Corporations established by Parliament or State Legislatures
  • Banking companies governed by the Banking Regulation Act, 1949
  • Electricity supply companies governed by the Electricity Supply Act 1948
  • Co-operative Societies registered under Co-operative Societies Act
  • Societies registered under the Societies Registered Act, 1860
  • Public and other chat liable trust registered under the Trusts Act, 1882
Salient Features of Statutory Audit
  • Statutory audit has been made compulsory by law.
  • The law determines its scope which cannot be restricted. However, to extend its scope, a separate agreement is required.
  • The qualifications for a statutory auditor has been prescribed by The Companies Act, 1956, which states that he must be Characterized Accountant as per the Chartered Accountants Act, 1949.
  • The rights, duties and liabilities of the statutory auditor are all laid down by the law.
  • A statutory audit is of independent nature and is required to submit his report to the shareholders only.
Statutory audit Vs Internal audit:

An internal audit is conducted by a permanent staff of the same company. He detects faults in financial systems, procedure and looks for improvement. However, statutory audit involves checking books of accounts as per the law and company act. There are more differences between the two, as explained below:
  • Appointment and removal
While an internal auditor is appointed by the company management, a statutory auditor is appointed by the shareholders or as per suggestions and decisions at Annual General Meeting. Same rules follow for removal from the post too.
  • Legal requirement
Statutory audit is the legal requirement, while internal audit is the requirement of the management without any legal obligation.
  • Qualification
There are specified qualifications for statutory auditor, while that of internal auditor isn’t specified by law.
  • Conducting of audit
The final audit is conducted after the final account has been prepared, unlike that in internal audit.
  • Scope of work
Scope of statutory audit is limited while that of internal audit is vague.
  • Remuneration
The remuneration for statutory auditor is fixed by the shareholders, while that of internal auditor is fixed by the management that appoints him.
  • Report
There is no need for report in case of internal auditors, while statutory auditors are must to present reports after completing their work.
Professional statutory audit, in a nutshell, can be described as above.

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