Project Audit, Internal Audit and Statutory Audit

What is an Audit?

An Audit is a systematic and independent examination of books of accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the organization.

What is a Project Audit?

The term Project Audit refers to the Audit of a particular project to check for any errors or recommending actions, in order to gain confidence in the quality of the output results and to visualize the areas which need to be addressed immediately.

The responsibility of the project audit lies with the higher management of the organization who shall assign this task to the audit team which shall have a clear brief and understanding of the objectives, scope, timing and restrictions of the project audit.

what are the benefits associated with a Project Audit?

  1. One of the main objects of the project audit is to ensure that the project being carried is compliant with the Government Regulations concerned with the projects.
  1. It may also contribute in finding the reasons for any project failures or errors along with any initiatives which needs to be taken care of concerning the time, effort and money associated with the project.
  1. A project audit is also acts as a quality assurance instrument for any project. It scrutinizes the whole project life cycle system by evaluating the inputs and outputs concerning the project to identify if there are any mistakes or errors concerned with the project.
  1. Identifying business risk is an added advantage of the project audit. Risk factor is associated with all the new projects, the risk evaluation of a particular project can minimize the risk of the project.
  1. Enhancing project performance is also a good output of the project audit.

What is an Internal Audit?

An Internal Audit is an independent internal check which involves a critical appraisal of the functioning of the entity with an object to suggest any improvements thereto to add value and to strengthen the mechanism of governance of the entity including the risk management.

Statutory Requirement for Internal Audit

As Per the Companies Act, 2013, following is a list of companies for which Conducting the Internal Audit is mandatory:

    1. Every Listed Company
    2. Unlisted Public Limited Company
      • Having Share Capital of Rs. 50 Cr or more during the previous financial year
      • Having turnover of Rs. 200 Cr or More during the previous financial year
      • Having outstanding loans or borrowings exceeding Rs. 100 cr at any point during the previous financial year
      • Having outstanding deposits of Rs. 25 cr at any point of time during the previous financial year
      1. Every Private Limited Company
        • Having turnover of Rs. 200 Cr or More during the previous financial year
        • Having outstanding loans or borrowings exceeding Rs. 100 cr at any point during the previous financial year

Note :

      1. The internal auditor may or may not be an employee of the company
      2. Internal Audit can be conducted by a chartered accountant/cost accountant or any other professional.
      3. Chartered accountant for the purpose of this rule shall mean chartered accountant whether engaged in practise or not

What is a Statutory Audit?

Statutory Audit is another name of the financial audit. As it is clear from the name the statutory or financial audit is an audit of the financial statements of the company i.e the balance sheet and profit and loss and other financial statements. The primary object of the statutory is audit is to ensure that the financial statements of the company represent a fair and true view of the company’s financial position.

Who is required to get Statutory audit done?

i. Every company registered under the Companies Act, 2013 need to get its accounts audited irrespective of the turnover of the company.
ii. Every LLP having annual turnover exceeding Rs. 40 lakhs for any financial year or its contribution exceeds Rs. 25 lakhs

Various sections of the Companies Act, 2013 contains the provisions related to the Statutory Audit;

Section 139 to Section 147 of the Companies Act, 2013 contains the various provisions for the Statutory Audit under the Act.

Section 139 contains the provisions with respect to the appointment of the auditor.

As per section 139 Every Company on its first annual general meeting shall appoint an auditor to hold the office of the auditor until the conclusion of the sixth annual general meeting.

After the appointment of the Auditor, the intimation of appointment of the auditor must be submitted to the registrar of companies in Form ADT-1 with prescribed fee within a period of 15 days.

As per section 141 a person can be appointed as an auditor of the company only if he is a chartered accountant in practise or a firm of chartered accountants in which majority of the partners are qualified chartered accountants.

Section 143 of the act lays down the provisions related to the powers and duties of the auditor and reporting of the audit.

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