Statutory Audit: What Is It, When, Who, and Why Is It Required?
A statutory audit is a legal requirement for certain companies to have their financial statements independently reviewed by certified auditors. Its core purpose is to ensure the accuracy, transparency, and compliance of financial data with applicable regulations.
This article explores what a statutory audit entails, who is subject to it, when it becomes mandatory, the main criteria involved, and the benefits it offers to businesses. It also shares practical guidance for preparing and how Rivile solutions can simplify the process.
What Is a Statutory Audit?
A statutory audit is an independent external evaluation of a company's financial statements, required by law for designated business entities. The audit assesses whether the financial reports accurately reflect the company's real financial position and comply with current accounting and tax standards.
Why Is It Important?
Auditing builds trust in a company’s operations—for shareholders, investors, and regulatory authorities. It also supports business leaders in evaluating operational efficiency and strategic performance.
When Does It Become Mandatory?
A statutory audit is not required for all companies—only those meeting specific criteria.
Legal Form Criteria: Audits are mandatory for:
- State and municipal enterprises
- Public interest entities (e.g., banks, insurance companies)
- Joint-stock companies exceeding set thresholds defined by law
Company Size Criteria: A company must undergo a statutory audit if it exceeds at least two of the following three indicators:
- Total assets above €1.8 million
- Sales revenue above €3.5 million
- Annual average number of employees exceeding 50
Nature of Activities: Audits are also mandatory if:
- The company operates in a public interest area
- Special laws require it (e.g., licensed or regulated activities)
Who Is Subject to Statutory Audit?
- Joint-stock and private limited companies (AB and UAB) exceeding legal thresholds
- Cooperatives and partnerships where required by founding documents or legal provisions
- Enterprises operating in regulated sectors such as insurance, finance, or energy
Audit Process and Key Stages
- Preparation – Gathering financial documents, defining audit objectives, and assessing risk
- Execution – Reviewing records, examining compliance, and evaluating accounting practices
- Reporting – Delivering audit findings, including confirmations, notes, or recommendations
Rivile ERP streamlines these stages by enabling efficient management of financial data, documentation, and secure access to audit-relevant information.
Final Thoughts & Recommendations
Statutory audits aren’t just regulatory obligations—they’re strategic tools that enhance a company’s integrity, bolster stakeholder confidence, and improve financial governance.
To prepare smoothly and confidently, businesses are encouraged to adopt modern accounting and document management systems like:
- Rivile ERP – A comprehensive business management solution
- Rivile GAMA – A tool for HR and document workflow
- Rivile MSCAN – A smart inventory management platform
FAQs
When can a company be exempt from statutory audit?
If it does not meet the legal thresholds—typically small or micro-enterprises with limited assets, revenue, or staff count.
How to choose the right audit firm?
Select a certified, reputable company with solid experience. Consider specialization and market reputation.
How long does the audit process take?
Generally between 2 to 6 weeks, depending on company size, documentation quality, and auditor access.
