Specific Process Followed By The Auditor During Statutory Audit In India


Statutory audits are usually required by the governmental agencies or the industry regulators. All banks, brokerage firms, and insurance companies typically provide such audited statutory reports of their financial statements on a regular basis. The process followed for statutory audit in India is varied and somewhat complex. It includes understanding the operation, controls, and environment of the business entity. Such audit procedures require experienced and certified auditors to reviews and analyze the internal mechanisms as well as statements of accounts, its balances and other relevant details. This is a very important aspect of a business to run and operate smoothly without any legal hassles.

The operating environment

The auditor usually checks the internal practices of the business and analyzes whether or not it is in compliance with the set standards and industry guidelines. The regulatory criteria are adjudged to find whether these practices are in agreement with the guidelines and are ethical. The auditor also looks into the internal processes and may send questionnaires, checklists, surveys, and formal notifications. These are in the form of "request letters," that are usually sent to the departmental or segment employees. The "request letter" asks about the specific information regarding a policy or process, any task or any activity related to the area audited.

Understanding the controls

An auditor from one of the top audit companies in India will also look into the operating controls of the business entity. This is usually done by asking the employees and the industry consultants. Sometimes the audit experts will also review the risk management practices of the business. For proper analysis, the auditor may seek information from the accountant, tax specialist, financial analyst, risk managers, and traders of the business. The auditor may also learn a lot more about the business by reading different industry publications and audit reports or working papers of previous years.

About test controls

When a specialist visits your business to conduct a regulatory audit of your financial statements, the primary objective will be to look into the corporate procedures, controls, operating mechanisms, fraud and error prevention techniques and much more. All these must agree with the industry standards and practices as set by the regulators. The auditor will also check these controls to find whether or not these are adequate and performing properly. The auditor also sees that all these controls are well understood by all employees who are involved with the particular process.

Check account balances

It is the job of the auditor to perform tests on your account balances. The primary objective of the auditor is to ensure that all financial reports are true and precise and nothing in it is materially misstated. They will want an error-free report so that it complies with the regulatory standards and industry practices. It is the characteristic feature of the best audit firms in India to follow the statutory principles of auditing. These principles ideally relate to the regulatory statutes only. However, these can be different from the generally accepted principles of business accounting.

Test the account details

Misstatements and mathematical inaccuracies indicate accounting flaws that will reflect in financial presentation and reporting. It is to prevent such issues that the auditor will also test all accounting details. There are different sets of tests performed by the auditor for this purpose. The primary objective is to check whether the financial statements are accurate. It is also seen whether these are complete in all respects and contains the statement of profit and loss, the statement of cash flows, balance sheet and a statement of the equity of the shareholders of the company that is audited.
Author Bio:
Seema Mehra is a Chartered Accountant at Ashok Maheshwary & Associates,one of best m&a firms in india that provides gst consulting services in india in a convenient manner. She is a professional writer and loves to share Financial related topics.


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