Statutory Audit

Companies are governed by the Companies Act 2013. This act requires every company registered under the Companies Act 2013 to get there accounts audited. Thus an audit conducted for such a companies that is governed by Company law will be known as a statutory audit.

All the regulations set by Companies Act and as well as the generally accepted auditing standards should be abided by while conducting an audit. The applicable accounting standards should also be adhered to. VJM & Associates LLP has years of experience in helping clients conduct statutory audits in a systematic and well planned manner.

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Definition and meaning of Statutory Audit

An audit is an examination of financial records, information and statements and expressing an opinion that whether financial records is prepared in accordance with statute under which audit is carried out. When this audit is governed by a statute or law, it is categorized under statutory audit. To explain, a company is governed by the Companies Act 2013. This act requires every company registered under the Companies Act to get his accounts audited by a practising Chartered Accountant. Thus an audit conducted for such a company that is governed by Company law will be known as a statutory audit. All the regulations set by Companies Act and as well as the generally accepted auditing standards should be abided by while conducting an audit. The applicable accounting standards should also be adhered to. An auditor should be an independent professional and must have expert knowledge of relevant statute. Further, it should be noted that the opinion expressed in the statutory audit should be independent and free of ambiguity. When the statutory audit is to be carried under the law, it has to be carried out according to the scope of audit set by that law.

The objective of Statutory audit
  1. As per (Standard on Auditing) SA 200 “ Overall objectives of Independent Auditor “ the objective of a statutory auditor while carrying out an audit of any financial statements is as follows :
    • To obtain reasonable assurance about whether the financial statements as a whole are free from any material misstatement; and
    • To report on the financial statements, and communicate as required by the SA’s in accordance with the auditors’ findings
The Scope of Statutory Audit
  1. The scope of the statutory audit implies the tasks that are to be done while carrying out an audit. It can also be termed as the responsibilities of a statutory auditor. Following are the various measures undertaken while doing a statutory audit:
    • Identify and examine all the overall aspects that need to be audited of an enterprise pertaining to the financial statements.
    • Auditor need to ascertain correctness, sufficiency and  reliability of the information and source data. For this purpose the auditor should evaluate accounting systems and internal controls.
    • Auditors should determine that Disclosure of overall relevant information in the financial statements has been made in accordance with statute and accounting standards.
    • A detailed study and analysis of internal control and accounting system
    • Verification of accounting transaction and balances through necessary test on check basis, enquiries and verification
    • Financial statements are compared to the summary of transactions and events recorded in the underlying accounts
    • Assessing the consistency of accounting policies that are applied while the financial statements are prepared by the management and also the disclosure to the effect should be adequate
    However, a statutory auditor cannot be held responsible for performing duties outside his scope of the audit. Also, if the constraint of the scope of audit impacts his unqualified opinion he should mention the same as a qualified or disclaimer opinion in his report.

Aspects to be covered in the Statutory audit
  1. The major characteristics covered while doing a statutory audit of the financial statements of an accounts are summarised below:
    • An overall examination of internal controls and system of accounting establishes the satisfaction that recording of transactions is appropriate
    • A review of procedures and system applied by the management to find out material inadequacy or weakness in the internal controls which may lead to fraud and error
    • Verification of arithmetical accuracy in the books of accounts with regards to postings, balances, etc
    • To ascertain if the proper difference is maintained in revenue and capital nature of transactions
    • Also, all the income and expenditure accounted for pertains to corresponding accounting period
    • Checking of supporting documents to establish the validity and authenticity of transactions
    • The financial statements namely balance sheet and profit and loss account or income and expenditure account are compared with the underlying accounts
    • The existence, value, and title of the asset as disclosed in the balance sheet are verified
    • The liabilities as mentioned in the balance sheet are verified
    • The true and fair position of the results in profit and loss account or income and expenditure account is verified
    • All the statutory compliances applicable to the enterprise are complied by the management within the proper time schedule and as per the norms set by the statutory governing body
    • Reporting is done to the pertinent person or body as required
Advantages of the statutory audit of financial statements
  1. An organisation has multiple stakeholders such as Shareholders, Bankers, Creditors, Customers, Management etc.  Financial statements represent the financial position of the company and are used by all the stakeholders to determine credibility of the company. As any error or fraud or misstatement may lead to heavy losses to the stakeholders. Therefore, statutory audit is carried out to determine whether financial statements represent the true and fair view of the state of affairs of the company. To understand the efficiency of the state of affairs which are based on reliable financial statements, conducting the statutory audit is cardinal. Apart from this, there are other advantages also which are briefed as under:
    • The financial interest of the stakeholders who are associated with the company is safeguarded due to the statutory audit
    • The statutory audit refrains and controls the employees from perpetrating embezzlement or defalcations
    • An audited statement of accounts form a base for calculating and settling taxes, for ascertaining the purchase consideration of the enterprise, or for negotiations of loan proposals
    • An audited statement of accounts help in settlement of trade disputes
    • When claims are to be made for damages in case of fire, or any other calamity, only audited financial statements can be considered as reliable and base for calculation
    • Determination of losses and wastage is done by statutory audit. This, in turn, helps to understand the deficiency of internal control measures applied by the management
    • Statutory audit ascertains proper upkeeping of books of accounts and records. The pooling of data also becomes easier
    • Audited financial statements form a base for calculation of settlement of dues at the time of admission and death or retirement of partners
    • Many a time to avail Governmental subsidies, grants, policies, etc it is mandatory to carry out the statutory audit
    • For participating in tenders also it is a prerequisite to carry out the statutory audit
A professionals role in statutory audit
  • Under most of the statutes, A practising Chartered Accountant is qualified to carry out statutory audit such as Audit under Companies Act, 2013, Tax Audit under Income Tax Act, 1961, GST audit under GST law etc.  Following role is played by VJM & Associates LLP, Chartered Accountants,  in the coherent, methodical, well organized, systematic conduction of statutory audit:
    • VJM & Associates LLP conducts audits in a systematic and well planned manner keeping in mind all  provisions of corresponding statute and accounting standard. It helps in determining reliability of financial statements. These statements augment the business of the organization.
    • Considering the importance of financial statements, statute has authorised only practising Chartered Accountant to carry out the audit.
    • Client-based solutions instead of stereotype functions
    • A risk-based assessment of embryonic threats to an enterprise is done, to let the management of any enterprise be well prepared for the future in every sense
    • An expert in the field anticipates and arranges for internal control and financial control guidelines as well as audit based for compliances for an enterprise

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What our clients say about us

By taking care of our Internal control policies and procedures, VJM Team have made sure that experience is hassle free.

Mr. sachin Jain
CFO, mahle filter system (i) pvt limited

Very professional approach from VJM Team, they got associated with us late in the financial year but were able to conduct an in depth audit and highlight the areas to be addressed within a short span of time. What gives us confidence is that they are available for consultation on any financial matter and are quick to find and implement the resolution

Mr. Shobit Bhatnagar
Gradeup.co

VJM team is a thoroughly professional chartered accountants equipped with all resources and with deep understanding of GST and other contemporary arenas of corporate consultancy. Have interacted with them for various tax and corporate law related matters and found the interaction quite useful.

Mr. Pawan Ladha
Freecharge

We are Repaibays Experts LLP. We are a new company and have just started our business in the field of AC charger installation. We have retained M/S VJM & Associates LLP; Chartered Accountants as CA for our company. They have a fairly large sized office and team and the whole environment seems professional and well organised: something which is very critical in this kind of business We wish VJM very well and am sure they are already a name to reckon with in the field of providing professional CA services !

Mr. Rajesh Singh
CEO, Repair bays

The dedication and commitment of VJM Team is par excellence.  The team has handled the entire GST refund claim filing process very professionally within their immense experience and expertise.  Coupled with complete attention to detail at every stage and rigorous follow ups, VJM Team has supporrted us through the GST export refund and all GST Compliances.

Mr. Sumit Rajani
CEO, Umenders Exports

I hired VJM Associates and now I can completely focus on my business because I know there’s someone who is managing my accounts properly. Their team (including Khushboo and Jayant) are super supportive and friendly. I highly recommend VJM Associates. Give them a try! You won’t be disappointed

Mr. Vikrant Shaurya
CEO, bestsellingbook.com

We give full credit to VJM for streamlining our company’s GST compliance. Their dedicated team of learned professionals have a focussed approach & exceptional clarity when it comes to any questions pertaining to GST. I can say, without their support, it would not have been possible for us to sail past the initial turbulent period when GST was launched. Our best wishes always with them !

Mr. Siddharth Gupta
CEO, Craft Home-Export House

Highly recommended …
 “We have been clients of VJM associates for a few years now and have built up a great relationship with them. They are very professional but approachable and always willing to listen and provide valuable advice when needed. Their knowledge of financial and accounting matters is exceptional, and I really appreciate their responsiveness to any questions or queries we have.
A large part of any working relationship comes down to personalities and we've always found the VJM team friendly and trust them to do the best for our business”

Mr. Anuj Jain
CEO, Berkman Forwarding

Service after company Registration

Know more about our complete portfolio of Company formation Services.

ROC Compliances

As per The Companies Act, ROC compliances mainly include Annual filing. Apart from Annual filing, disclosure by directors, annual return draft, and updating the Statutory Register undergo ROC compliances. ROC compliances are mandatory. Any slack or negligence can lead to penalties, fines and other legal issues pertaining to the Company. At VJM & Associates LLP we have the team of experts having expertise and experience in Company Law Matters.

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Corporate Law Advisiory

The Companies Act 2013 has offered a new era of corporate governance, transparency and investor activism. We have the expertise and in-depth knowledge of the entire subject. We brainstorm on company compliances so that our clients can save time, money and labor to invest in their core competencies. We offer a wide range of services on Companies Act, 2013 under one roof to serve different types of companies including PSUs, MNCs, listed and unlisted companies.

Learn More

ROC Compliances

As per The Companies Act, ROC compliances mainly include Annual filing. Apart from Annual filing, disclosure by directors, annual return draft, and updating the Statutory Register undergo ROC compliances. ROC compliances are mandatory. Any slack or negligence can lead to penalties, fines and other legal issues pertaining to the Company. At VJM & Associates LLP we have the team of experts having expertise and experience in Company Law Matters.

Learn More

Company Audit

VJM & Associates LLP specializes in offering company audit services, creating value for your time, money, labor, and business management. Our internal and management audits help companies grow faster and find out the weak areas that need improvements to reduce cost and increase profit margin. In an efficient IT environment, we create the Risk Management framework to offer you u2018Risk Based Audit’ (RBA) that minimizes upcoming risk and maximizes revenues.

Learn More

Corporate Law Advisiory

The Companies Act 2013 has offered a new era of corporate governance, transparency and investor activism. We have the expertise and in-depth knowledge of the entire subject. We brainstorm on company compliances so that our clients can save time, money and labor to invest in their core competencies. We offer a wide range of services on Companies Act, 2013 under one roof to serve different types of companies including PSUs, MNCs, listed and unlisted companies.

Learn More

Company Audit

VJM & Associates LLP specializes in offering company audit services, creating value for your time, money, labor, and business management. Our internal and management audits help companies grow faster and find out the weak areas that need improvements to reduce cost and increase profit margin. In an efficient IT environment, we create the Risk Management framework to offer you u2018Risk Based Audit’ (RBA) that minimizes upcoming risk and maximizes revenues.

Learn More

FAQs on Statutory Audit

Q1. Is statutory audit compulsory?

Statutory audit is an audit prescribed and governed by a statute or law. Hence it is a compulsory audit. This audit depends on the constitution of an entity. Every enterprise which is registered under the specific governing body has to follow the regulations as set by the law regarding the audit.

Thus one can say that statutory audit is a compulsory audit if the governing law states the same. E.g. Companies Act, 2013 requires every company to carry out the statutory audit. Whereas, Limited Liability Partnership Act required audit of an LLP only if turnover of the LLP exceeds INR 40 lacs during a Financial year.

Q2. What is the difference between the tax audit and statutory audit?

Phrases such as “Statutory Audit” and “tax audit” are not formally used in any statute rather for the purpose of ease of understanding these terms are used. In common parlence, statutory audit is governed by the specific law or statute that governs the entity while tax audit is governed by the Income tax Act. Statutory audit is to be done as and when the relevant law states while tax audit is to be done if the turnover or gross receipts of an entity during the year crosses a specified limit.

Q3 . What is a statutory and non-statutory audit?

Statutory audit is carried out as required by law while the non-statutory audit is carried to determine efficiency of the entity either by the management or any independent party. The focus of the statutory audit is majorly on financial activities while the non-statutory audit may focus on financial aspect or may consider any other aspect such as expenditure audit, Debtors audit, stock audit etc.

Q4 . What is the due date for the statutory audit?

The due date for the statutory audit is decided by the Governing body which prescribes the audit.

For example, as per Companies Act, 2013, every company is required to hold Annual General Meeting within 6 months from close of the Financial year and Company is required to present its audited financial statement in such AGM for adoption.

21 days clear notice is required to hold AGM. Accordingly, statutory audit under Companies Act should be carried out to ensure this compliance. Due date for the Tax audit for corporate is 30th September of the following Financial year. However, for FY 2019-20, it is extended to 31st October 2020.

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