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There are several requirements and legal responsibilities for statutory audit, especially for the directors and auditors. Over the years, audit and its increased regulation have made things that were already complex further complicated. A lot of expertise is required by the auditors to prepare an accurate and concise report, and a lot of knowledge is required by the directors to avoid legal hassles and obligations. There are separate sections under the Companies Act 2015 that enumerates such responsibilities of both the directors as well as the auditors. Several additions and alterations include: An increased legislation to auditing has made it compulsory under the Section 628 of the Companies Act of 2015 for all companies to maintain proper accounting records. According to Section 629 of the same Act, if a company fails to comply with the clause mentioned in Section 628 then the company, each of its officers in default or committing an offense and failing to maintain proper accounting records will be liable to conviction. Requirements for proper accounting records also includes Section 630 that states the company must preserve its accounting records for at least seven years from and including the date on which it was created. If a company is under liquidation, the 7-year rule may be subjected to other regulations that are laid for companies in liquidation. Requirements of directors To comply with the set standards of statutory audit in India, the needs of the directors of any company includes: Preparing a financial statement for the company every fiscal year and preserve it after presenting it for audit. Such financial statements must be referred to as the individual financial statement of the company and must be accurate and flawless in all respects. If the directors of any company fail to prepare such financial statements for any given fiscal year of the company according to the requirements of this Part, then each of the directors who are at fault will be considered to have committed an offense and are liable to pay monetary penalties. Even after being convicted of an offense the directors fails to prepare the required financial statement, then further penalties will be levied on each of the directors found guilty of committing the offense. Requirements for audited financial statements Just as the directors of the company, the financial statements for each year of the company have a few requirements. Under Section 709 of the Act, it is mentioned that it is the responsibility of the directors of the company to have the financial statements of each year of the company audited by a certified and best audit firms in India. The audit must be done in accordance with the set standards, and the report retained. However, there may be a few exemptions as per the law. These exemptions are applicable when the company is already exempted from audit under section 711 or 714. Each of these exemptions has specific characteristics. Under section 711 a company will be exempted if: It complies with the conditions of law qualifying as a small company that year It has a small turnover in that year and The value of its net assets as specified in the balance sheet for that year is low. Exemption from audit under Section 714 is allowed when: The company has been dormant since the first day of its formation or It has been dormant since the end of the preceding financial year. However, the company may not be exempted from audit even if it appeals to have been dormant in the given fiscal year if the company was banking or an insurance company or any e-money issuer. Functions of auditors As for the tasks and responsibilities of the auditors, whether it is of a small firm or from one of the top audit companies in India, these are equally important and complex. It is required that: An auditor will make a report about the annual financial statements of the company to the members of the company Review and identify the financial statements and give a possibility of his audit along with the standards followed. Provide a preliminary as well as a final report within the stipulated time limit...
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