1. What is the purpose of a statutory audit, and why is it important?

Answer: The purpose of a statutory audit is to independently examine a company's financial statements and
ensure their accuracy, reliability, and compliance with applicable laws and accounting standards. It provides
assurance to stakeholders, such as investors, lenders, and regulators, regarding the company's financial
position and performance. A statutory audit is important as it enhances transparency, promotes
accountability, and helps maintain the integrity of financial reporting.

2. Can you explain the key steps involved in conducting a statutory audit?
Answer: The key steps in conducting a statutory audit typically include:
a. Planning: Understanding the client's business, assessing risks, and developing an audit strategy.
b. Risk assessment: Identifying and assessing potential risks that may impact the financial
statements.
c. Internal control evaluation: Assessing the effectiveness of internal controls and determining the
reliance on them.
d. Substantive procedures: Performing detailed testing of transactions, account balances, and
disclosures.
e. Audit documentation: Maintaining comprehensive and organized documentation of audit
procedures and findings.
f. Reporting: Communicating the audit results through an audit report, including any significant
findings or observations.

3. How do you evaluate and test internal controls during a statutory audit?
Answer: Evaluating and testing internal controls involves: a. Understanding the client's internal control
system and documenting it. b. Assessing the design adequacy of controls to mitigate risks. c. Performing tests
of controls to determine the operating effectiveness of controls. d. Analyzing and documenting any control
deficiencies or weaknesses. e. Considering the impact of control deficiencies on the audit approach and
procedures.

4. How do you handle situations where you identify potential audit risks or issues during the audit?
Answer: When encountering potential audit risks or issues, I would
a. Communicate the matter to my seniors or supervisors promptly.
b. Discuss and evaluate the significance and impact of the risk or issue on the audit.
c. Propose appropriate adjustments to the audit plan or additional procedures, if required.
d. Document the risk or issue and any actions taken in the audit file.
e. Maintain open communication with the client to address and resolve the identified risks or issues
effectively.

5. Can you explain the concept of materiality in the context of a statutory audit?
Answer: Materiality refers to the significance or importance of an item, transaction, or error in the financial
statements. It is assessed by considering its potential impact on the decisions of users of the financial
statements. In a statutory audit, materiality is used to determine the nature, timing, and extent of audit
procedures. The auditor focuses on items that are material individually or in aggregate, ensuring that they
are appropriately disclosed, presented, and accounted for in the financial statements.

6. What is the purpose of a statutory audit?

Answer: The purpose of a statutory audit is to independently examine an organization's financial statements
and ensure they present a true and fair view of its financial position and performance. Statutory audits are
conducted to provide assurance to stakeholders, including shareholders, creditors, and regulatory bodies,
regarding the accuracy and reliability of the financial information presented by the entity.

7. How would you plan and approach a statutory audit engagement?

Answer: To plan a statutory audit engagement, I would begin by understanding the organization's business,
industry, and specific risks involved. I would review the previous year's audit reports and financial statements
to identify key areas of focus. Next, I would develop an audit plan, including determining the audit scope,
selecting the appropriate audit procedures, and assigning resources effectively. Regular communication with
the client and obtaining necessary information and documentation would be essential throughout the
process.

8. What are some common risks you consider during a statutory audit?
Answer: Common risks considered during a statutory audit include the risk of material misstatement due to
fraud or error, control deficiencies in internal processes, accounting estimates, and the risk of non-
compliance with applicable laws and regulations. It is important to identify and assess these risks during the
audit planning stage and design appropriate procedures to mitigate them effectively.

9. How do you ensure compliance with auditing standards during a statutory audit?
Answer: To ensure compliance with auditing standards during a statutory audit, I would adhere to the
principles of the relevant auditing framework (such as International Standards on Auditing). I would maintain
professional skepticism, exercise professional judgment, and apply the necessary audit procedures to obtain
sufficient appropriate audit evidence. Regular monitoring and review by senior team members would also
help ensure compliance with auditing standards.

10. Can you explain the concept of materiality in the context of a statutory audit?
Answer: Materiality refers to the magnitude of an omission or misstatement in financial statements that, if
known, could influence the economic decisions of users. During a statutory audit, determining materiality
helps auditors identify areas of the financial statements that require closer attention. Materiality is assessed
in both quantitative and qualitative terms, considering factors such as the size of the misstatement, nature of
the item, and potential impact on users' decisions.

11. How do you document your audit work and findings during a statutory audit?
Answer: Documentation is a critical aspect of a statutory audit. I would maintain comprehensive working papers,
including audit plans, procedures performed, evidence obtained, and conclusions reached. Clear and concise
documentation facilitates review, provides support for the audit opinion, and ensures continuity of the audit process.
It also assists in complying with professional standards and serves as a reference for future audits.