A statutory audit is a legally required review of the accuracy of a companys or governments financial statements and records. The purpose of a statutory audit is to determine whether an organization provides a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records, and financial transactions. The term "statutory" denotes that the audit is required by statute, which is a law or regulation enacted by the legislative branch of the organization’s associated government.

Statutory audits are typically performed using auditing and accounting standards prescribed by the local government. They are usually conducted annually, but the frequency might vary based on regulatory requirements or the specific needs of stakeholders. The specifics of statutory audits, including their requirements, procedures, and reporting standards, can vary widely between jurisdictions based on local regulations and standards.

The primary purpose of a statutory audit is to provide an independent assurance to stakeholders, such as shareholders or regulators, that the company’s financial statements present a true and fair view of its financial position and performance. Companies must be careful when relying on the statutory audit report as evidence that their subsidiary’s financial records are accurate for various reasons, including differences between local and U.S. accounting standards and the statutory audit process being different from the U.S. audit in many respects.

In summary, a statutory audit is a legally mandated review and verification of a companys financial statements and related operations to ensure accuracy and conformity with accounting standards and regulations.