What is a Non-statutory Audit?
The non-statutory audit is the audit that not required by the law or regulation and it is conducted to check internal control compliance and efficiency. Management wants to check the efficiency level base on company policy and rules. The entity is exempt from the law requirement, but management still engages with an external auditor to audit the financial statement.
This audited report will not be submitted to the government or any regulation, but only to the board of directors and shareholders.
The main objective of a non-statutory audit is to allow the external auditor to express their opinion on the financial statement. They will gather evidence and conduct audit testing in order to provide audit opinion on the financial statement. They will tell the readers whether the financial statement is free from material misstatement.
Advantages of Non-Statutory Audit
- Improve company Internal Control: Auditors can review internal control to ensure it can prevent and detect risk. Good internal control will be able to reduce the risk of error and fraud.
- Safeguard Company Asset: Auditors can suggest good control to safeguard company asset and prevent it from being a steal. Physical control is very important to prevent any misappropriate use of company assets.
- Increase Reliability and Integrity of Financial Statement: The external user will have more confidence over the company’s financial statement when they are audited by an independent auditor. Shareholders can believe in the management who operates the business. Creditors will be able to provide more loans to the company and so on.
- More confidence from business partners: Business partners such as suppliers and customers will have more confidence in the company. A supplier can provide longer credit terms to the company.
- Detect Internal control weakness: Auditors can help to provide good recommendations over a deficiency in internal control.
Disadvantages of Non-Statutory Audit
- Huge Cost: auditing the financial statement will require a huge cost as it performs by the professional auditor. When there is no requirement, spending on auditors seems useless for the company. Management can access the internal control without spending and get a better result.
- Auditor competent: Not all auditors are competent enough to provide us the best recommendation. Some of them just work to complete the job without any added value to the customers. While other auditors may only provide a recommendation that increases the admin works without any real benefits to the company.
- Waste time: management and staffs need to spend more time with auditors before they complete their job. It will impact the business operation as staff needs to spare time for auditors.