A statutory audit can be defined as a compulsory audit mandated by a country’s laws, also called an external audit, since it is carried out by independent qualified people, external to the organisation under audit. The purpose of a statutory audit is to provide reasonable assurance that the organization is providing a fair and accurate representation of its financial records and that the financial statements prepared are free of any material misstatements, errors and discrepancies.
Internal audit has the high level objective of serving management’s needs through constructive recommendations in areas such as internal control, risk, utilization of resources, compliance with laws, MIS, etc. An effective internal audit plays a key role in assisting the board to discharge its governance responsibilities and in determining whether other internal controls are well designed and properly operated.
As per section 44AB of the Income Tax Act, 1961 every business and profession has to undertake compulsory tax audit in case turnover from such business exceeds Rs 100 lakhs for business and in case of profession gross receipt exceeds Rs 25 lakhs from such profession.
The purpose of conducting Social Audit is not to find fault with the individual functionaries but to assess the performance in terms of social, environmental and community goals of the organisation. It is a way of measuring the extent to which an organisation lives up to the shared values and objectives it has committed itself to. It provides an assessment of the impact of organisationʹs non‐financial objectives through systematic and regular monitoring, based on the views of its stakeholders.
Social accounting and audit process is for social and community enterprises to understand it’s impact on the surrounding community and on it’s beneficiaries and build accountability by engaging with its key stakeholders. In this way it can prove its value and improve its performance.
It helps the enterprise to also demonstrate to funders what the organization has achieved other than just having survived as an enterprise. It also helps the organization to give information alongside the financial accounts which tells the world that the organization is different from other enterprises.
Corporate Social Responsibility has gained acceptance and importance in the past few years and we have quite a lot of corporate engaging with all sorts of causes and with different levels of engagement.
Corporates who donate a fixed sum of money every year or a percentage of profits as proceeds would like to know whether their money has been well spent and for the cause agreed upon. Financial audit of the organization/ project to which the donation has been made would typically reveal whether the money has been spent for legitimate purposes, supported by evidence etc. Whereas a social audit of the organization/ project would help the corporate to understand the impact of the money spent. Has the project achieved what it had set out to achieve? How can the organization monitor the performance more effectively? How can it steer itself to perform better?
Due diligence is a process of evaluating details before making a business decision.
It can be used in case of a potential investment either in a new business or in a new process. It aims to assess the material facts in regards to a merger, acquisition, privatization or possible financial impact of a change in process or investment in a new material or product. Due diligence can also be used to investigate current practices.