Securing the financial health and compliance of a subsidiary company is crucial for its success and overall business operations. Without thorough audits, subsidiaries risk operational inefficiencies and legal complications. Statutory audit services for subsidiary company play a vital role in maintaining this clarity, accuracy, and adherence to regulations.
Statutory audits provide an unbiased assessment of a subsidiary’s financial health, helping parent companies maintain control and uphold investor confidence. Explore with us the types of audits mandated for these companies, things to consider before, during, and after an audit, and reasons that make PKC Management Consulting a top choice for these services.
Types of Statutory Audits Applicable for Subsidiary Company
In India, statutory audits for subsidiary companies are governed by various provisions under the Companies Act, 2013, and other relevant regulations. The types of statutory audits applicable for subsidiary companies in India are:
Financial Audit:
It is mandated by the Companies Act 2013. It involves examining a subsidiary company’s financial statements to ensure that they present an accurate view of the company’s financial position. This audit is conducted by an independent auditor appointed by the company.
Tax Audit:
These audits are required under the Income Tax Act 1961. They ensure that the subsidiary company’s income and expenses are reported correctly and that all tax-related laws are complied with.
Internal Audit:
While internal audits are not always mandatory for all subsidiary companies, they are required for certain classes of companies. They are designed to evaluate the effectiveness of a subsidiary company’s internal controls, risk management, and governance processes.
Cost Audit:
They are required by the Companies Act 2013 (for certain companies engaged in production, processing, manufacturing, or mining activities). They involve the verification of cost records and accounts to ensure they are accurate and adhere to the cost accounting standards.
Statutory Audit Services for Subsidiary Company: Before & After Considerations
When planning for statutory audit services for subsidiary company in India, it’s important to be aware of both pre-audit and post-audit phases to ensure compliance and effective financial management. Here are the key considerations for each phase:
Before the Audit: Planning & Preparation
- Appointment of Auditors: Ensure timely appointment of qualified auditors in accordance with the Companies Act, 2013.
- Communication with Auditors: Establish clear communication channels with the auditors to discuss expectations, timelines, and any specific areas of concern.
- Documentation: Gather and organize all relevant financial records, supporting documents, and internal control manuals.
- Internal Review: Conduct a preliminary internal review to identify and rectify any errors or inconsistencies in the financial statements.
- Risk Assessment: Identify and assess potential risks that may affect the audit process, such as related party transactions, complex accounting issues, or regulatory changes.
- Budgeting: Allocate sufficient budget for statutory audit fees and related expenses.
During the Audit: Cooperation and Support
- Provide Access: Ensure auditors have access to all necessary information, personnel, and facilities.
- Respond Promptly: Respond to auditor queries and requests for information in a timely and accurate manner.
- Address Issues: Discuss any audit findings or observations openly and proactively.
- Resolve Discrepancies: Work with auditors to resolve any discrepancies or disagreements in a professional and constructive manner.
After the Audit: Review and Implementation
- Review Audit Report: Carefully review the audit report and understand the auditor’s opinion and any qualifications or observations.
- Implement Recommendations: Take necessary actions to address any weaknesses or deficiencies identified in the audit report.
- Strengthen Internal Controls: Implement measures to strengthen internal controls and improve financial reporting processes.
- Maintain Compliance: Ensure ongoing compliance with relevant laws, regulations, and accounting standards.
- Evaluate Audit Firm: Assess the performance of the audit firm and consider feedback for future engagements.
What Makes PKC’s Statutory Audit Services for Subsidiary Company Impactful?
The expertise in statutory audits, combined with PKC Management Consulting’s extensive financial consulting experience, positions us uniquely to deliver exceptional value to subsidiary companies. Here are what makes our services high value:
Expertise in Group Structures and Reporting:
PKC’s auditors are well-versed in the complexities of group structures, intercompany transactions, and consolidated financial reporting. This is crucial for ensuring the accuracy and transparency of financial statements for both the subsidiary and the parent company.
Risk-Based Auditing:
At PKC Management Consulting, we employ a risk-based audit methodology that focuses on identifying and addressing the subsidiary company’s most significant risks. This approach helps to optimize audit resources and provides valuable insights to management.
Experience with Cross-Border Transactions:
Many subsidiary companies engage in cross-border transactions with their parent companies or other group entities. Our familiarity with international accounting standards and transfer pricing regulations facilitates smooth and compliant reporting of these transactions.
Focus on Related Party Transactions:
Our audit expert pays close attention to related party transactions, which are quite prevalent in subsidiary companies. Their scrutiny helps identify and address potential conflicts of interest and ensures fair valuations.
All Inclusive Financial Health Assessment:
Our statutory audit services for subsidiary company go over and above ensuring compliance. We take a closer look into the financial health of your subsidiary companies. By analyzing financial statements, identifying inefficiencies, and suggesting improvements, we help subsidiaries optimize their financial performance and strengthen their balance sheets.
Contact PKC for Expert Subsidiary Audits!
Frequently Asked Questions
Why is a statutory audit necessary for a subsidiary company in India?
A statutory audit is a legal requirement for all companies registered in India as per the Companies Act 2013, including subsidiaries. It helps build trust among stakeholders, ensures transparency, and helps identify potential financial risks and areas for improvement.
What is the scope of a statutory audit for a subsidiary company?
A statutory audit of a subsidiary company covers a broad range of activities including examining financial statements, assessing internal controls, verifying compliance with regulations, and reporting the company’s financial position.
Who conducts the statutory audit for a subsidiary company?
The statutory audit of a subsidiary company is conducted by a qualified and independent auditor or auditing firm like PKC Management Consulting appointed by the company’s shareholders or board of directors.
How often must a subsidiary company undergo a statutory audit?
In line with the financial year-end reporting requirements, a subsidiary company must undergo a statutory audit annually.
How does PKC Management Consulting handle discrepancies found during a statutory audit?
We handle discrepancies by thoroughly investigating and providing detailed reports on findings. Our audit experts also recommend corrective actions to ensure compliance and accuracy in financial reporting.
