Statutory Audit || Advantages Of Statutory Audit || Disadvantages Of Statutory Audit

Statutory audits are important for any company to undertake as they provide an opportunity to identify areas for further improvement where potential. They help to ensure that a company has all of its parts in working order and are able to operate in an effective and efficient manner. There are, however, some advantages and disadvantages of statutory audits, which companies should consider carefully before proceeding with the audit process.
Statutory Audit || Advantages Of Statutory Audit || Disadvantages Of Statutory Audit

Advantages Of  Statutory Audit

  1. One of the main advantages of a statutory audit is the chance to improve a company's management practices and procedures where significant errors or weaknesses have been identified. These could include ineffective risk management strategies, a lack of adequate controls over internal matters, and ineffective reporting provisions.
In addition to this, an audit can highlight areas where company processes are not fit for purpose and could be improved. For example, if a company does not have procedures in place for contacting suppliers on time, for obtaining sufficient stock, or for ensuring that repayments are made, then the whole point of an audit could be undermined. This could result in the loss of a company's reputation and, in extreme cases, the loss of business.

2. Another advantage of a statutory audit is the chance to identify areas for improvement where changes are needed to streamline and improve processes and procedures. For example, if a company lacks sufficient policies and procedures in place to prevent the occurrence of fraud and embezzlement, then these gaps may be immediately identified and corrected through an effective audit. The results of this audit may also lead to recommendations being put forward to the government or regulatory bodies, and these may result in improvements being introduced.

3. A statutory audit will also allow any members of the staff to give their feedback about the work of the company. This will give a manager the opportunity to address any concerns raised and implement improvements where necessary.

Formal auditing is usually done by a qualified accountant, who will carry out a thorough examination of the company's financial records and the way in which they are being managed. It may also include looking into the company's internal management structures as well as looking at the activities of its directors. The audit report is full and is generally published after a short period of time, known as the submission date.

Submissions may be required from any external parties who have had a role with the company that is being audited. These parties are obliged to provide documentation relating to the events they have conducted. It may also be required to interview people who may have had an impact on the performance of the company. Submissions can be made by any member of staff, or by any company representative who requests it.

An audit should be conducted quickly so that lessons can be learned quickly. If the findings of the audit are not good, then these may need to be changed. However, there are also some risks associated with an audit, including the possibility that false information has been provided and that the true picture of the company's financial situation is obscured.

Some companies may choose to hide their weaknesses instead of learning from them. However, if this is the case, then the audit has failed, and a company needs to look into whether it is covering all the risks that could affect it.

Disadvantages Of Statutory Audit

Statutory Audit Process Takes A Lot Of Time. This is especially true if the company needs to conduct several financial reports at the same time. Companies that already have several financial reports may find it difficult to conduct a statutory audit since they might already have the financial reports prepared and published.

A statutory audit, on the other hand, requires the company to prepare its financial reports and then conduct a review based on the internal controls found in the company's internal control system.

Another disadvantage is that the company may be penalized for unauthorized disclosures. This could result in serious penalties or investigations by various regulatory agencies.

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