The Companies Act has clearly defined the importance, role, responsibilities, and duties of the statutory auditor. A statutory Auditor is referred to an external auditor who is certified to check the accuracy of the financials statement and company accounts either.
Who can’t act as Auditor?
Following are the persons who are not eligible for appointment as a statutory auditor:
- Any person who is an officer or an employee of the company;
- Any Body corporate other than a limited liability partnership (LLP) of professionals;
- Any person whose relative is a director of the company or who is a position of key managerial personnel in the company.
- Any person convicted by the court of any offense involving fraud and tenure of ten years has not elapsed from the date of his conviction.
- Any person who is a partner, or who is in the employment, of an officer or employee of the company.
- Any person or a firm who, whether directly or indirectly, has a business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company of such nature.
- The person who is in full-time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, more than twenty companies.
Powers of Statutory Auditor:
- Right to obtain information, collect data, and explanation from the officers.
- Right to attend general meeting.
- Right to visit branch office and check branch accounts.
- Right to sign audit report and financial statements.
- Right to make representation on behalf of the company.
Duties of Statutory Auditor:
- Preparation of audit report and ensure that every detail of the financial statements are true and fair.
- Mark an adverse remark on the points which are incorrect and false in the financials.
- An auditor can inquire about the loans and advances are properly maintained and secured.
- To check that no personal income has been curbed in the business revenue.
- Accounting standards are duly followed or not.
- The auditor should comply with the auditing standards while performing his duties.
- The auditor should merge all the branch audit report into the main audit file.
- On the suspicions and fraud act, the auditor should report this matter to the central government.
- Code of ethics and code of professional conduct must be adhering by the professional.
- Assistance to the assessing officers while investigation.
- He should check that loans and advances made by the company are mentioned as deposits in the books.
What is the applicability of Statutory Audit?
- For LLP:
Statutory audit is applicable if turnover in any financial year exceeds Rs. 40 Lakhs or its contribution exceeds Rs. 25 Lakhs.
- For Private Company/ Public Company: Mandatory irrespective of Turnover, profits, etc. If the company is incurring loss even then statutory audit is required.
Who can conduct a statutory audit?
As per the law, only an independent chartered accountant, or a chartered accountant firm, or limited liability partnership firm (LLP) with the majority of partners practicing in India are qualified for appointment as an auditor of a company. The motive behind statutory audit is to determine whether a company is providing correct representation of its financial situation or not.
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