Statutory Audit – Meaning & Applicability
Statutory Audits are audits determined by different laws such as the Reserve Bank of India, Income Taxes, Company Laws, etc. Chartered accountants need to conduct many audits in accordance with the provisions of different laws.
The Process to Conduct a Statutory Audit
Auditors must ensure that their reports must include quantification of advances, deposits, interest income and interest costs. Important elements for checking the mandatory bank audits are:
A. Cash Verification Procedure
B. Tax Related Items
C. Verification of Loan Accounts
After conducting an audit, the auditor must provide an audit report for the same thing. An auditor is required to make a report as stated in the engagement letter where he must state the following:
I. Does the balance sheet show a true and fair view that contains all the things needed to show a true and fair view of the bank’s business
ii. Whether profit and loss accounts show the actual balance for the period covered by the account
iii. whether the transactions made by branches that are not in branch power
The Content of Audit Report
|Heading||Brief of contents|
|The title||should mention that it is an ‘Independent Auditor’s Report’.|
|Addressee||Should mention clearly as to whom the report is being given to.
For example Members of the company, Board of Directors
|Management’s Responsibility for Financial Statements||Mentions that it is the Management’s responsibility to Prepare the Financial Statements.|
|Auditor’s Responsibility||Mention that responsibility of the Auditor is to express an unbiased opinion on the financial statements and issue an audit report.|
|Opinion||Should mention the overall impression obtained from the audit of financial statements.
For example Modified Opinion, Unmodified Opinion
|The basis of the Opinion||States the basis on which the opinion as reported has been achieved. Facts of the basis should be mentioned.|
|Other Reporting Responsibility||If any other reporting responsibility exists, the same should be mentioned.
For example Report on Legal or Regulatory requirements
|Signature of the Auditor||The engagement partner (auditor) shall sign the audit report.|
|Place of Signature||The city in which audit report is signed.|
|Date of Audit Report||Date on which the audit report is signed.|
Long Form Audit Report (LFAR)
Audit reports in accordance with Statutory Requirements, the Requirements of Public, Private & Foreign Sector Banks require Auditors to provide LFAR. The things that the bank wants the auditor to examine have been prescribed by the RBI.