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The primary objective of the Statutory Audit is to ensure that the financial statement (such as balance sheet, profit & loss Account etc.) provides a true & fair view of the company financial state of affairs. As per the company’s Act it is mandatory for all the Registered companies to get their books of Accounts audited by the practicing Chartered Accountants
Statutory audit means audit of statutory areas i.e. Income tax, Service tax , VAT ,ESI, Provident fund etc.


The primary objective of 'Statutory Audit’ is “to ensure that the financial statements i.e. the Balance Sheet, Income & Expenditure Account and Receipt & Payment Account, give a true & fair view and are free from any material misstatements” Statutory Audit of the financial statements should provide reasonable assurance that the accounts -have been prepared in accordance with the Generally Accepted Accounting Principles; & -are free of any material misstatements, errors and discrepancies


  • Dormant companies
  • Small exempt private companies (“EPCs”)


A company that has no accounting transactions for the financial year in question or has not started Business since its corporation


A private company in the shares of which no beneficial interest is held directly or indirectly by any corporation and which has not more than 20 members OR Any private company, being a private company that is wholly-owned by the Government, which the Minister, in the national interest, declares by notification in the Gazetteto be an exempt private company




Generally, conducted once a year


Mission Director of the State

Mandatory or not

Compulsory by law


Following Documentary Evidences are require to be verify for A Statutory Audit    

1.  opening balance verification

2.   vouching 

cash vouching
 bank vouching
 cash verification
  bank reconciliation statement
   purchase vouching
   sale vouching
   journal vouching



(i)  In the case of profit&loss a/c care should be taken for the individual breakups of sale and services.

(ii)   Verify the various statutory dues such as vat, service tax, excise duties which has amore connection with sales and services and various periodic returns showing the payment due date and vat credit should be accounted properly.

(iii)  Concentrate more on delivery dates and also on deliveries exceeding more than one     month. That results delay in delivery.

 (iv)   In the case of purchases verification whether the vat has been accounted separately vat input tax credit account. 

(v)   In the case of direct expenses and indirect expenses concentrate on the agreements like rent, fees, royalty, lease rent, advertisement, other expenses.

(vi)  In the  case of preliminary expenses the treatment showing whether it is capitalized           within five years

(vii) Minutes of the meeting should be verified showing the any resolutions for capitalization of expenses, managerial remuneration, loans, approving donations(Especially 50,000 or more)

(ix)  In case of foreign agency commission expense change in foreign exchange fluctuation   should be accounted properly

(x) Any income from investment i.e. interest, dividend should be check bank account.

(xi) Verification of valuation of closing stock whether closing stock valuation as per accounting standard-2   


(i)Share capital 

To see any resolution pass for increase in share capital how many no. of share issued.
Verify whether the share capital changes are there and whether the     changes are authorized under proper resolution.

(ii) In the case of secured loans whether the loans have been issued under proper sanction and written representation from banks and confirmation of balances from banks

(iii) In case of balance sheet proper disclosure between the secured and unsecured loans should be done and document evidencing the receipt of the loan should be taken.

(iv) Verify deprecation on assets as per company act and income tax act after considering  additions &deletions of assets.

(v)   Where fixed asset has been acquired from outside India and the rate of exchange changes after acquisition, the increase/decrease in the liability of the company for repayment of the whole or part of the money borrowed in any foreign currency for acquisition is adjusted in the cost of the asset (refer AS 11).

(vi) In case of companies other than investment companies or banking Companies, whether any of the shares, debentures or securities were sold at a price less than their purchase cost If so, obtain written explanation from management regarding justification for the same — section 227(1A)(c)


A.Collection and Remittance of CST & VAT
B - Collection and Remittance of Service Tax .
C - Deduction and Remittance of TDS
D - Deducion and Remittance of Provident FUND & ESI
E - Deduction and Remittance of Professional Tax


What Does a Statutory Auditor Do

A statutory auditor is an external auditor appointed by a company to audit its books or other activities as required by law. Generally, this auditor reviews a company’s accounting practices and determines if they meet minimum requirements. Sometimes the statutory auditor is hired by the accounting committee of the board of directors; at other times he or she may be employed directly by the board of directors. It is rare that management of a corporation would hire this auditor.

Normally, the statutory auditor reviews the accounting practices of the corporation each year. This review includes the most important accounting activities, internal controls, and reporting procedures. The auditor's review compares the company’s activities to best practices as found in the country in which the company is located. The auditor must then present a report to the audit committee of the board of directors, or directly to the board of directors.

An auditor works closely with the management of the company to gather information necessary to complete the required work. Each auditor exercises caution in the relationships he or she develops with company management because the statutory auditor must always be considered independent. Some audit committees and boards of directors limit any additional work that the statutory auditor may do for the company in order to ensure the auditor’s independence.



Where a company, whether a public or a private limited, has a branch office, its accounts should also be audited. The audit of the accounts of branch office can be done either by:

  • The company’s auditor
  • By any other person who is qualified to act as the company’s auditor

However, if the branch is situated in a country outside India, a person who is duly qualified to act as auditor of the branch in accordance with the laws of that country, can also be appointed as auditor of branch.