Overview

MVM Advisor, based in Delhi, India, is your go-to service provider for statutory audit and tax audit services. Our dedicated team ensures a meticulous analysis of your business operations, guaranteeing that financial statements, including the balance sheet, profit/loss account, and cash flow statement, present a true and fair view. We specialize in statutory audits mandated by law to meet regulatory standards. Clients can reach out to us anytime for detailed discussions on enhancing their financial compliance and transparency.

Statutory Audit Procedure

A statutory audit, mandated by industry regulators and government agencies, involves a comprehensive procedure to ensure accuracy and compliance. The audit process includes:

1. Understanding the Operating Environment: The auditor assesses industrial guidelines and regulatory criteria, ensuring ethical adherence. This involves deploying questionnaires, checklists, surveys, and formal notifications.
2. Understanding Controls: The auditor delves into a business entity’s operational controls, gathering insights from employees, external auditors, industry publications, and previous audit reports. This provides a thorough understanding of the company’s control mechanisms.
3. Testing Controls: Specialists conduct regulatory audits, evaluating corporate procedures and operating mechanisms to prevent fraud or errors. The auditor ensures that operating controls align with industry practices, meet regulatory standards, are adequately performed, and are well-understood by involved employees.
4. Testing Account Balances: Auditors perform tests on account balances to verify error-free financial reports that comply with regulatory standards, statutory principles, and industry practices.
5. Testing Account Details: Detailed tests on account balances, whether for banks, insurance companies, or hedge funds, ensure the accuracy and completeness of audited statutory financial statements. This meticulous process guarantees the reliability of financial reporting.

Internal Audit and Statutory Audit

Internal Audit serves as an independent department within a company, conducting impartial reviews of systems and processes. Employed directly by the company, internal auditors adhere to in-house standards and utilize internal resources to perform audits.

In contrast, Statutory Audit is a legally mandated review to ensure the accuracy and fairness of the company’s accounts, following provisions under the Companies Act or Tax Audit regulations like Section 44AB of the Income Tax Act.

Notably, statutory auditors, typically practicing chartered accountants, differ from internal auditors, who are employees of the company. Statutory audits are conducted annually, while internal audits focus on fraud detection and error prevention. Additionally, the management appoints internal auditors, while shareholders appoint statutory auditors during the annual general meeting, highlighting the fundamental distinctions between the two.

Types of Statutory Audit

The prevalent forms of statutory audits encompass:

1. Tax Audit: Conducted by the Internal Revenue Service (IRS), a tax audit involves a meticulous examination of the tax return to ensure the accuracy of reported income and deductions. The IRS opts for a tax audit to closely scrutinize and verify the precision of financial details.
2. Company Audit: As per Section 183(3) of the Companies Act 1994, a company audit entails the examination of a company’s balance sheet, profit and loss account, income and expenditure account, or cash flow statement by the appointed auditor. This audit process ensures the financial transparency and compliance of the company with statutory regulations.