Importance of Statutory Audits: A Primary Step Towards Ensuring Financial Transparency

What is the first thing that comes to mind when we speak of statutory audit? Is it just about scrutinizing the books to find flaws? Well, the statutory auditing process goes well beyond that. A statutory audit helps verify your accounts to ensure that your company's financial statements are accurate. It also keeps your company's accounts in compliance with the regulatory standards.

With proper auditing, you can enhance your business credibility. You can also save up on having to pay heavy penalties. Wondering how exactly you are going to achieve all that by yourself? Sounds overwhelming, right? Not anymore. Partnering with the right CA firm like BC Shetty & Co. will eliminate all the intricacies and complexities.

Here we are going to walk you through the various aspects of a statutory audit. We will also tell you how you can rely on the B C Shetty team to carry out the auditing process on your behalf.

What Are Statutory Audits All About?

“Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction, and skillful execution." - William A. Foster.

As rightly said, quality is something that can only be achieved with extraordinary efforts and proper execution, and that’s what the chartered accountants at BC Shetty will help you with. They will ensure that the entire statutory process is carried out accurately so that your company’s long-term financial goals can be achieved.

A statutory audit is basically an analysis of your company's financial data to discourage fraud and ensure that all the records are fair and accurate. The audit is mainly performed by independent auditors. The role of a statutory auditor is to review the company's records and compare them with the exact financial statements. These regulatory processes have a big role to play in offering the necessary confidence to the stakeholders that the financial details are accurate.

Indian law mandates annual statutory audits for all public companies and large private companies. In 2023, around 12,000 companies were audited. These days, a large number of startups and SMEs are also opting for statutory audits to boost credibility and facilitate funding. In fact, about 40% of startups and SMEs reported conducting audits every year.

What Makes Statutory Audits Important?

If you are willing to ensure that all your company’s finances are in order, it is inevitable that you opt for a statutory audit on a regular basis. Audits are important for the following aspects:

Discourage frauds:

You must be aware of the Satyam Fraud Case aren’t you? Well, the Satyam Scam happens to be one of India's largest corporate fraud. For several years, Satyam accounts showed profits that had never existed. It even showed cash at the bank that did not exist. This inflated the company’s share price. The falsified accounts were used to obtain cheap loans in the USA. The

company’s collapse shook the entire world. It also permanently altered the corporate governance landscape in India.

So, if you want to ensure that your company’s finances are in order at all times, then you must opt for the statutory auditing process. Performing an independent audit of your financial statement can offer you the required peace of mind. It also ensures that the data is free from any kind of errors. This gives the stakeholders the necessary confidence in your business. You are also able to carry out your business operations smoothly and effectively.

Avoid costly penalties due to regulatory non-compliance:

By performing regular audits, you can adhere to the ongoing rules and regulations. You can also meet the compliance standards and avoid heavy penalties. The penalty for non-compliance with the audit trail requirements under the Companies Act 2013 can range from INR 25,000 to INR 5 lakh. The exact penalty depends on the nature and extent of violation of the company laws.

Regular audits offer you financial insights into your company's finances so that you can make well-researched financial decisions for your company. This helps in improving your company’s financial stability. You can minimise bottlenecks and drive operational efficiency in your organisation. Your company’s financial processes can also be streamlined. You can also save yourself from all kinds of legal repercussions.

Report on the organisation’s ability to meet its liabilities:

Auditors are the financial detectives of your organisation. They will carefully analyse financial records to identify fraud and gaps in your financial structure. Catching fraudulent activities at an early stage can save you from incurring major losses. A statutory audit firm can also offer your company financial stability. You will get to know where exactly you stand in terms of your finances and whether you are able to meet the financial liabilities.

An audit is like a seal of approval for your company. The auditing process can help you in acquiring the trust of the stakeholders. You can give your stakeholders the confidence that all your details are accurate. It also helps attract new investors and seek new opportunities for your business.

Standardise the financial reports to help investors make sound decisions:

You can rely on the services of the auditor to standise the financial processes. The auditors can help generate customised reports based on your company's financial data. This will allow the investors to identify investment opportunities and make sound decisions.

Through in-depth financial reporting, you will be able to make well-researched financial decisions for your business. This will keep your finances in order. You will also be able to navigate the various financial challenges and give your company an excellent shape in this dynamic scenario.

Standardise the financial reports to help investors make sound decisions:

While the auditing process can be highly rewarding for your company, it comes with a labyrinth of challenges, like:

• Dealing with complex financial situations.
• Remaining aware of various rapidly changing accounting standards.
• Keeping updated with the diverse technological advancements.

All these challenges can be easily addressed if you hire a reliable auditor for carrying out the auditing process for your business.

Best Practices for Conducting Statutory Audits:

To navigate the challenges of the auditing process, here are some of the best practices that can be followed:

• Understanding the complete financial scenario of the organisation.
• Outlining a plan for conducting the audit.
• Identifying the risk factors and developing internal controls.
• Maintaining proper communication with the client.

Conclusion:

As you can see, statutory audits have an indispensable role to play in ensuring that financial transparency is maintained at an organisation. So, if you wish to ensure that all your company’s accounting needs are well addressed, then it is time that you reach out to BC Shetty & Co. which is one of the best ca firms in Bangalore and conduct a statutory audit for your firm. This will ensure that your finances are in order. You will also be able to carry out your business operations without any hindrance.