Statutory Audits

Introduction 

Auditors have statutory obligations that force them to operate according to certain principles and regulations such as checking(inspecting) whether a business has kept a sufficient amount of records about a company’s transaction. The regulations in auditing are focused on rights, duties and eligibility towards acting as a an auditor.

Regulatory Bodies 

Numerous sources are involved with producing the regulations for auditing, including  national legislation, international regulations, standard-setting and professional bodies.  Over the years due to the level of fraudulent cases and inefficient auditing procedures, the Financial Reporting Council (FRC) has taken responsibility for setting stricter auditing standards. In addition, the FRC besides setting auditing standards, also focus on monitoring and enforcing auditing standards to auditors.

Below is a list of all the accounting bodies which focus on regulations for auditors:

  • International Standards on Auditing (ISAs) – The International Standards on Auditing (ISAs) provides the basic principles and procedures for auditing.
  • Ethical Standards on Auditing (ESs) – The ESs states the principles and procedures that cover integrity, objectivity and independency for auditors when auditing financial statements.
  • Generally Accepted Auditing Standards (GAAS) – The GAAS concerns describing the rules, which act as the basis for auditors to conduct their work and how the quality of work is assessed.

International Auditing and Assurance Standards Board (IAASB)

The purpose of the IAASB is to develop and issue standards to ensure audits are of reasonable assurance.

There aim is to develop and issue standards on auditing to ensure high quality auditing and assurance is achieved. Some of the objectives of the IAASB include:

  • Establishing high quality audit standards for financial statement that are understandable by users/stakeholders worldwide.
  • Establishing high quality standards and guidance
  • Publishing on auditing and assurance maters for the attention of the public to enhance understanding in auditing.

Limitations of statutory audits 

Some of the limitations concerning statutory auditing includes:

  • Auditing is subjective rather than objective because auditors give an opinion of the accounts.
  • Limitations of accounting and control system (eg Errors, Fraud etc).
  • Users may not understand all the terms used in audit reports.

To conclude, auditors only give a reasonable assurance(opinion) that financial statements are free from misstatements suppose to a factual statement.