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Which type of audit is conducted compulsorily under the provisions of a statute or law?
  • a)
    Government audit
  • b)
    Internal audit
  • c)
    Statutory audit
  • d)
    Private audit
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Which type of audit is conducted compulsorily under the provisions of ...
Statutory Audit:

Statutory audit refers to the type of audit that is conducted compulsorily under the provisions of a statute or law. It is a legal requirement for certain entities to have their financial statements audited by an independent and qualified auditor. The purpose of a statutory audit is to ensure that the financial statements present a true and fair view of the entity's financial position and performance.

Entities Subject to Statutory Audit:

Statutory audits are typically required for entities that are regulated by specific laws or statutes. Some common examples include:

1. Companies: In many jurisdictions, companies are required to have their financial statements audited by a statutory auditor. This ensures that shareholders and other stakeholders can rely on the accuracy and reliability of the financial information presented.

2. Banks and Financial Institutions: Financial institutions, such as banks, are subject to stringent regulatory requirements. They are required to undergo regular statutory audits to assess their financial stability, compliance with regulatory guidelines, and risk management practices.

3. Non-profit Organizations: Non-profit organizations that receive public funds or donations may be required to undergo a statutory audit to ensure transparency and accountability in their financial operations.

4. Government Agencies: Government agencies and departments often undergo statutory audits to ensure proper use of public funds and compliance with financial regulations.

Role of Statutory Auditor:

The statutory auditor is an independent professional appointed to conduct the audit. Their role is to examine the financial statements, assess the internal controls, and express an opinion on whether the financial statements provide a true and fair view of the entity's financial position and performance. The auditor also examines the entity's compliance with relevant laws, regulations, and accounting standards.

Benefits of Statutory Audit:

1. Enhances Credibility: A statutory audit adds credibility to an entity's financial statements by providing an independent and unbiased opinion on their accuracy and reliability.

2. Detects Errors and Fraud: The audit process helps in identifying any errors, irregularities, or fraudulent activities within an organization, thereby enabling corrective actions to be taken.

3. Ensures Compliance: Statutory audits help ensure compliance with applicable laws, regulations, and accounting standards. This promotes transparency and accountability in financial reporting.

4. Protects Stakeholder Interests: The audit provides assurance to shareholders, lenders, investors, and other stakeholders that the financial statements are prepared in accordance with the applicable standards and regulations.

Conclusion:

In conclusion, a statutory audit is conducted compulsorily under the provisions of a statute or law. It is an essential tool for ensuring the accuracy of financial statements, promoting transparency, and protecting stakeholder interests. The statutory auditor plays a crucial role in examining the financial statements, assessing compliance, and providing an independent opinion on the entity's financial position and performance.
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Which type of audit is conducted compulsorily under the provisions of ...
Statutory audit is conducted compulsorily under the provisions of a statute or law. It is a mandatory audit required by specific regulations governing certain types of organizations.
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Which type of audit is conducted compulsorily under the provisions of a statute or law?a)Government auditb)Internal auditc)Statutory auditd)Private auditCorrect answer is option 'C'. Can you explain this answer?
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