Distinguish between Internal Audit and Statutory Audit
An internal audit is conducted by the permanent staff of the office to detect weakness in system, procedures and for the improvement. Auditor employed by individual companies, partnership, Govt., agencies, individual and other entities are called internal auditors. These auditors may review employee performance, compliance with company regulations and financial and accounting systems.
Statutory audit is the act of checking books of accounts as per the provision of company act. Both of them check books of account; detect errors and frauds even though they have certain differences which are as follows:
- Appointment: An internal auditor is generally appointed by the management.
- Legal Requirement: Internal audit is the need of management but it is not a legal obligation.
- Qualification: It does as required specific qualification as per provision of law.
- Conducting of audit: It is a regular nature.
- Status: An internal auditor is a staff.
- The scope of work: It is related to the examination of books of accounts and other activities of an organization.
- Removal: Internal auditor can be removed by management.
- Remuneration: Internal auditor is fixed by the management.
- Report: Internal auditor needs to give suggestions to improve weakness but no need to present report.
- Appointment: Statutory auditor is appointed by the shareholders or Annual General Meeting.
- Legal Requirement: It is legal obligation.
- Qualification: To do Statutory audit auditor must be a CA holder.
- Conducting of audit: It is conducted after the preparation of final account.
- Status: A statutory auditor is an independent person.
- The scope of work: It checks the books of accounts and related evidential documents.
- Removal: Statutory auditor can be removed by the annual general meeting only.
- Remuneration: Remuneration of a statutory auditor is fixed by the shareholders.
- Report: Statutory auditor requires preparing the report after the completion of work on the basis of facts found during the course of audit and presenting such report to the appointing authority.