A statutory audit is a legal procedure to be done to review the accuracy of an organization’s financial statement and records. It is mandatory to conduct a statutory audit for government organizations to monitor and evaluate their performance.
Generally, the statutory report is prepared for the public. It helps to determine whether the company is providing a fair and accurate financial information to the public. The statutory audit examines information such as bookkeeping records, bank balances, and financial transactions. The statutory auditors are selected by the General Meeting of Shareholders for the period of 3 to 5 years.
The advantages of conducting a statutory audit for one’s company are:
The statutory audit procedure includes an understanding of the organization’s operating environment and controls. A statutory auditor needs to test internal mechanisms as well as details of accounts. Thus, the statutory audit procedure comprises the following steps:
A firm needs to have the following documents before getting a statutory audit started:
|A statutory auditor is appointed by the shareholders of the company||An internal auditor is appointed by the management|
|The audit is conducted after preparing the final accounts||Internal audit is a continuous process|
|Statutory audit is a legal requirement||The scope of an internal audit is limited to the management|
|It is conducted by an external auditor or an audit firm||It is conducted by the employees of the organization or an audit firm|
|A statutory audit report must comply with certain standards||No such rules hold for internal audit|
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As per the Commercial Companies Law, audit is mandatory for all companies. But certain free zones have separate auditing requirements.
It is mandatory for foreign companies to submit audited financial statements of the branch of foreign companies registered in UAE in every year.
Other government authorities such as the Municipality, various Ministerial Departments, Insurance Authorities, etc. also demand companies to submit their audited financial statements as and when required by such authorities.