Statutory Audit

What is the purpose of a statutory audit?

• To provide legal advice to the company

• To provide an independent and objective assessment of a company's financial statements

• To promote the company's products

• To increase the company's profits

Explain the difference between statutory audit and internal audit.

• Statutory audit is internal and focuses on operational improvements.

• Statutory audit is external and ensures legal compliance, while internal audit is internal and focuses on operational improvements.

• Statutory audit is a type of financial audit.

• Internal audit is external and ensures legal compliance.

What are the key steps involved in conducting a statutory audit?

• Tax preparation, Payroll processing, Internal control testing

• Inventory management, Marketing strategy, Customer service

• Budgeting, Forecasting, Financial reporting

• Planning, Understanding the entity and its environment, Risk assessment, Audit procedures, Evaluating audit evidence, Forming an opinion

Why is independence important for statutory auditors?

• Independence is only important for non-statutory auditors

• Statutory auditors should always be biased in their work

• Independence is not important for statutory auditors

• Independence is important for statutory auditors to ensure they can perform their duties objectively and without bias.

What is the role of the auditor in detecting fraud during a statutory audit?

• Conducting financial statement analysis

• Assessing risk, understanding controls, analytical procedures, interviews, examining documentation

• Reviewing internal controls

• Performing inventory counts

Discuss the importance of materiality in the context of statutory audit.

• Materiality is irrelevant in statutory audit

• Auditors should focus on non-essential areas

• Providing inaccurate information to stakeholders is acceptable

• Materiality is crucial in statutory audit as it guides auditors in focusing on key areas, ensures resources are used efficiently, and helps in providing reliable and relevant information to stakeholders.

What are the reporting requirements for a statutory audit?

• Reviewing marketing strategies

• Creating a budget forecast

• Preparing financial statements, auditor's report, management report, and any other required documentation.

• Conducting interviews with employees

Explain the concept of audit risk and how it is managed in a statutory audit.

• Audit risk is managed by ignoring inherent risk and control risk, focusing only on detection risk.

• Audit risk is managed by increasing inherent risk and control risk to reduce detection risk.

• Audit risk is managed by randomly selecting audit procedures without considering inherent risk and control risk.

• Audit risk is managed in a statutory audit by assessing inherent risk and control risk, and adjusting the audit procedures to reduce detection risk.

What are the limitations of a statutory audit?

• Limited assurance, reliance on management representations, time constraints, potential conflicts of interest, inability to detect all forms of fraud or error

• Unlimited assurance

• No time constraints

• No reliance on management representations

How does a statutory audit benefit stakeholders of a company?

• A statutory audit benefits stakeholders by promoting fraud, falsifying financial statements, and decreasing transparency.

• A statutory audit benefits stakeholders by delaying financial reporting, ignoring compliance, and decreasing credibility.

• A statutory audit benefits stakeholders by providing assurance on financial statements, detecting fraud, ensuring compliance, and enhancing credibility.

• A statutory audit benefits stakeholders by increasing taxes, reducing profits, and causing financial instability.