A statutory audit is a legally mandated review of your financial accounts. This can be applied to organisations, to governments and statutory bodies, and individuals. These audits are conducted by financial authorities, who can ask to see financial records and statements as well as the company books or relevant records of transactions. Some audits will arise at regular intervals, while others may follow suspected activity within the organisation. Find out a little more about the statutory audit requirements with our simple guide.
What is the statutory audit register?
You may have heard of the statutory audit register of England, Wales, Scotland, and Ireland. This is a database of auditors that have been registered and are authorised to carry out company audits. It's important that any audits are carried out by one of the professionals listed on this register, as membership demonstrates that the individual in question has the relevant skills and qualifications and has been recognised and granted the necessary authority to undertake the audit.
What are the statutory audit requirements?
There is a range of different organisations and individuals that may be subject to statutory audits. This is particularly relevant for public companies, although some private companies will also be subject to statutory audits. There are different requirements based on a company's income level, while there may be more demanding requirements for businesses that deal with client funds, such as solicitors or companies dealing with pensions. Specific organisations are eligible for an audit exemption under the Companies Act 2006, but it is essential to understand the restrictions around these rules.
What is the difference between a statutory audit and a non-statutory audit?
Audits don't exclusively happen when legally required. Non-statutory audits are reviews of company finances that are voluntary and are not necessarily mandated by financial bodies. These can be requested by, for example, shareholders, while they may also be carried out internally to stay on top of company accounts. Non-statutory audits will typically consider financial statements and reports, but they are not restricted to this – unlike statutory audits. Non-statutory audits can be carried out to assess a company's financial strength in a wide variety of areas, from staff management to marketing.
What is the difference between a statutory audit and a tax audit?
While both statutory audits and tax audits take their authority from legislation, they come from two different acts. Statutory audits are required for certain organisations by virtue of the Company Act 2006, whereas tax audits are set out in the Income Tax Act 2007. As the name suggests, tax audits are concerned solely with tax considerations, and the audit can be undertaken by a chartered accountant. On the other hand, a statutory audit will be undertaken by a registered external auditor. Both audits seek to ensure accuracy and transparency but in slightly different areas of the company's financial health.
What are standard statutory audit fees?
Despite being legally mandated, statutory audits still carry fees that must be covered by the organisation in question. There is no fixed fee for a statutory audit, although audit committees negotiate and assess the costs in question and make recommendations to the company board. The cost of an audit will vary depending on the organisation's size, the complexity of the task at hand, and a variety of other factors. It's also worth considering the other costs to the business in terms of the time and working hours required to prepare all the necessary documents.
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