Statutory audit is the audit that a company needs to do according to the requirement of law which applies to the company. The primary purpose of having a statutory audit is to let the auditors from an audit firm Johor Bahru collect all related information. Then, the auditors will be able to issue audit opinion about the true and fair view of the financial position of a company on a given date, probably the date on the balance sheet.
The statutory audit aims to let the auditors give his opinion independently, which means the auditors must not be influenced in any manner. He will assess the financial records of the company before delivering his judgment in the audit report. Thus, the stakeholders may depend on the company’s financial statements. Other than shareholders, the stakeholders will also benefit from the audit since they can make decisions by referring to the authentic and audited accounts.
Advantages
– Statutory audit increases the credibility and genuineness of the company’s financial statements as the auditor acts as an independent party that verifies the statements.
– The audit(Also see Advantages of Performing Continuous Audits) makes sure that the management has made an effort when they are carrying out their responsibilities
– The statutory audit will indicate the company’s compliance with non-statutory requirements such as corporate governance and so on.
– The auditor (Also see Audit – Checklist for the Compliance Audit) will give his feedback on the internal control an organisation is implementing as well as perform internal checks in the related areas or departments. He will also tell the management about the weakness of the internal control and the parts that are susceptible to risks. Thus, the company can minimise those risks, and this helps in improving the company’s performance.
Disadvantages
– The company may have to spend a lot on an audit. However, if the firm has engaged in an audit (Also see Audit – The Definition of Audit Assertions?) firm to let the professionals look after their daily tasks, for example, the process of preparing the accounts, then the cost of an audit will be relatively lower when compared to those companies that do not do so.
– Statutory audits may disturb the employees from performing their day to day chores as they may need to answer the query from the auditor or provide the necessary documents to him. As a result, the employees may need more time to complete their work, probably beyond office hours. Also, this can cause the employees to be stressed out at work.
– Audits (Also see How to Reduce Time Required for Audit Cycle?) have some inherent limitations, for example, the internal control of the company, the auditors need to complete it in the time given, and the auditor may have limited power, and so on.
– There are a lot of areas that the auditors (Also see How to Reduce Time Required for Audit Cycle?) can only get the information from the management. This is dangerous since if the management is involved in frauds, then they are going to give manipulated representations to the auditors.