The word audit is derived from the Latin “Audire” which means “Hear”. The audit is the Process by which competent individuals examine accounting records to form an opinion and generate the audit report.
The objective of the Non-Statutory Audit:
The main objective of an audit is the assessment of financial statements prepared with in a framework of recognized accounting policies and helps to present the true and fair view of the financial position of the business.
Following are the objectives to be realized
- Detection and prevention of errors
- Detection and prevention of frauds
- Clerical Errors
- Compensating Errors
- Errors of Principles
What Is a Non-Statutory Audit?
Non-Statutory audit is the audit which is not required by law and is performed to check the efficiency level of the organization and based on organizational customs, rules and decisions and does not need to report directly to the regularity authorities helps to make strategic decisions.
Why Should Non-Statutory Audit Conduct?
Management is responsible to ensure the effective internal control system within an organization which helps to reduce the risks in order to achieve organizational objectives.
Advantages of Non-Statutory Audit:
- Auditors work with management to review the systems and operations
- Reduces the organizational risks and helps to achieve objectives
- Reliability and integrity of the financial and operational system.
- Safeguarding of Assets
- Compliance with contracts and regulations
- Auditors provide recommendations where deficiencies are identified.
- Provide assurance to shareholders, regulators, employees.
- Reduces the cause of external audit
Disadvantages of Non-Statutory Audit:
- Incompetent, unskilled, and experience audit staff fails to help the management
- Staff shortage may cause a delay in the assessment of records.
- Time management is essential between the records assessment and entries.
- Errors in books of accounts due to incompetent audit staff.
- Evidence constraint may lead to the possibility of error.
- Improper division of duties because the management does not divide the tasks appropriately then audit goes worst.
Statutory audits are important and essential for a number of reasons, first such kinds of audits are required by law and help to ensure that the management is not dysfunctional and has proper internal controls and helps to reduce the risk of fraud, misstatement of Financial Statements. Statutory Audit increases the credibility of the business and helps to improve the business process.