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CA P KARTHIKA (Chartered Accountant)     11 May 2009

Can Internal Auditor do Statutory Audit

Can Internal Auditors do Statutory Audit????

The answer is no, can you support your answer with reference to Code of Conducts

 17 Replies

Milan Somani

Milan Somani (CA)     11 May 2009

conflict of interest.......

Ankur Garg

Ankur Garg (Company Secretary and Compliance Officer)     11 May 2009


Internal Auditor acting as Statutory Auditor:


Where an Internal Auditor is an employee of the company, he is disqualified for appointment as a Statutory Auditor. But where a company employs an outside firm to conduct its Internal Audit, the Internal Auditor does not become an employee of the company. Even in such a case, the Internal Auditor cannot be appointed as a statutory Auditor, because it will not be possible for him to give as independent and objective report under section-227 read with CARO, 2003.



As per CARO, 2003 Statutory Auditor has to state in his report whether there is adequate Internal Control System in the company….


Hope now you can interpret yourself….


To conclude I would say in no case internal auditor can be appointed as a statutory auditor.


If you still have a doubt then please post it.


Best Regards


CA P KARTHIKA (Chartered Accountant)     12 May 2009

Thankyou Mr. Ankur, I knew the answer but I need reference to which schedule and clause is that statement quoted in Companies Act. Can you post it if possible!

Best Regards

1 Like
Ankur Garg

Ankur Garg (Company Secretary and Compliance Officer)     12 May 2009

Hi Karthika,


Department of Corporate Affairs has in exercise of the powers conferred by sub-section (4A) of Section 227 of the Companies Act, 1956 read with the Notification of the Government of India after consultation with the ICAI , in regard to class of companies to which this order applies and other ancillary matters, makes the following Companies Audit Report Order, 2003.

Please find the relevant attachment for your reference and go through the highlighted portion in the Order, 2003.


Attached File : 47 caro, 2003.doc downloaded: 1168 times
Ankur Garg

Ankur Garg (Company Secretary and Compliance Officer)     12 May 2009

Also find attach Notification regarding Companies Audit Report (Amendment) Order, 2004.

Attached File : 45 caro (amendment), 2004.doc downloaded: 1036 times

CA P KARTHIKA (Chartered Accountant)     14 May 2009

Thanks for the attachment Mr. Ankur Sir

Ankur Garg

Ankur Garg (Company Secretary and Compliance Officer)     14 May 2009

Thanks for the appreciation....Good Luck

Varun Kumar S K

Varun Kumar S K (Student)     27 June 2009

I heard that CA institute have made an ammendment regarding appointment of statutory auditor.. Can any1 help me out plz...


Mallikarjun (Asst Mgr-Internal Audit)     01 July 2009



NO.Internal auditor can not become statutory auditor of the company.

1 Like

Aravind (CA-Final)     11 December 2009

@ Ankur Garg

even if an internal auditor is an outside firm, it can't be statutory auditor's because, even though they are independent, they'll be reporting to the management and even management only decide their scope of work which affects their independence to be appointed as statutory auditors.


Vivek (Finally passed CA Final...!!!!!)     26 May 2011

Dear Ankur Sir,

First of all, I thnak your valuable inputs to this forum. Your articles, helped a lot during my CA student days.

I need one clarification from you sir... In a CA firm, can one partner be appointed as an Internal Auditor and another partner is appointed as Statutory auditor....?

If the answer is No, Is the position is same in the case of Limited liability partnership also. Because, in LLP, one designated partner is not responsible for the Acts of another designated partner. Hence, can both internal auditor and statutory auditor can form limited liability partnership?

Your valuable input will be very useful for me.

Viveka Hegde


vinaykumar.peddisetti (chartered accountant)     18 April 2012

i agree with u



Arpit (seniour acct)     25 April 2012

But can internal auditor (Private Company ) accept appointment as a statutory auditor for the same financial year after giving resignation in between of the year? In this case previous statutory auditor has resigned and company intends to appoint internal auditor as a statutory auditor.

ABHINANDAN JAIN (CA Student)     28 April 2012

what if other arm / firm of same group are both stat and internal auditor...

For example xyz & co. is doing stat audit of a co. (Say 'P') so my question is :

Can xyz & associates (another arm of XYZ group) conduct internal audit of same co. i.e. 'P'...?

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