Statutory Audit
Definition
An audit required by law or regulation, conducted by an independent external auditor, with the objective of expressing an opinion on whether an organisation's financial statements present a true and fair view. Mandatory for most companies above statutory size thresholds in most jurisdictions.
- Basis
- Required by law or regulation, not by choice
- Auditor
- Independent external auditor
- Objective
- Opinion on true and fair view of financial statements
- Applicability
- Mandatory above statutory size thresholds in most jurisdictions
Common questions
How does a statutory audit differ from a forensic audit in objective?+
A statutory audit tests whether financial statements are fairly presented as a whole, using sampling and materiality thresholds, while a forensic audit investigates a specific suspected act, such as fraud, and aims to build evidence usable in legal proceedings rather than an opinion on the accounts overall.
Can a clean statutory audit opinion rule out fraud?+
No. Statutory audits are designed to detect material misstatement, not every instance of fraud, and skilled concealment or collusion can fall below the materiality threshold or outside the sample tested, which is why a clean opinion does not certify the absence of fraud.
Related terms
- Chain of Custody
- The documented chronological record of who collected, handled, transferred, and examined a piece of evidence. For digital evidence, chain of custody includes...
- Forensic Audit
- An examination of an organisation's financial records and systems conducted specifically to gather evidence for legal proceedings. Distinguished from a regular audit...
- ISA 240
- International Standard on Auditing 240, 'The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements,' issued by the IAASB. Sets...
- Reasonable Assurance
- The high but not absolute level of assurance that a statutory auditor seeks to obtain before expressing an opinion. Reasonable assurance acknowledges...
- True and Fair View
- The standard of financial statement presentation required by statutory audit frameworks in the UK, EU, India, and many Commonwealth jurisdictions. In the...