The statutory auditor is often seen as an inspector imposed by law. Yet their role is much broader: by certifying that the accounts give a true and fair view of the company, they bring confidence to shareholders, banks, partners and the management team itself. Here is what you need to know about their role and the situations in which they are involved.
What does a statutory auditor do?
Their main task is the statutory audit: they express an independent opinion on the company’s annual financial statements. They check that the accounts are compliant and honest, and that they give a true and fair view of the company’s assets, financial position and results.
Beyond certification, they carry out specific checks required by law, for example on the information provided to shareholders or on certain agreements entered into between the company and its directors.
An independent professional
The statutory auditor does not take part in running the company and does not keep its books. This independence is what gives their opinion its value: they cannot audit accounts that they have prepared themselves.
When is the appointment of a statutory auditor mandatory?
The law requires certain companies to appoint a statutory auditor, depending on their legal form (this is the case for public limited companies, for instance) and, for other forms, on their size, assessed against thresholds set by the legislation. Other situations may also require one, depending on the business sector or the transaction envisaged.
The exact thresholds and rules depend on your company’s legal form and the legislation in force: your adviser can check precisely whether your company is concerned.
The contractual audit: a voluntary approach
Even without any legal obligation, a company may choose to have its accounts audited. This contractual audit meets practical needs:
- reassuring a bank or an investor when applying for financing;
- preparing a sale, an acquisition or the arrival of a new shareholder;
- obtaining an outside view of the reliability of the financial information;
- responding to a request from a group or a foreign partner.
Assignments linked to specific transactions
Certain transactions require the involvement of a statutory auditor or another authorised professional to secure the shareholders’ decisions: contributions in kind, conversion of the company into another legal form, mergers, capital increases or reductions. Their report enables shareholders to make an informed decision.
How does an audit assignment work?
- Understanding the company, its business and its risks;
- assessing internal control and accounting procedures;
- testing the accounts: sampling, third-party confirmations, stock counts, analyses;
- summary and report, with recommendations to management where appropriate.
When well prepared, an audit assignment is also an opportunity to identify ways to improve the company’s accounting and financial organisation.
Chartered accountant and statutory auditor: what is the difference?
The two professions are complementary but distinct. The chartered accountant supports the company: they keep or supervise its books, prepare its accounts and returns, and advise it. The statutory auditor, on the other hand, checks: they examine the accounts that have been prepared and express an independent opinion for shareholders and third parties.
The same professional may practise both, but never for the same company: the independence rules forbid it. Your chartered accountant and your statutory auditor are therefore necessarily two different firms or people.
In summary
Mandatory in some cases and voluntary in others, the involvement of a statutory auditor strengthens the credibility of your financial information. LAYODIS provides audit & statutory audit services, in compliance with the profession’s independence rules. Talk to us about your obligations.
