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ravi shekhar (articled clerk)     09 September 2011

Differences between statutory audit and internal audit

Could anyone tell me that what is differences between statutory audit and internal audit.Plz reply me



 12 Replies

V. Shruti

V. Shruti (student cwa final)     09 September 2011

Statutory Audit is compulsury as per statute.(Companies Act,1956),

Internal Audit is not..

devang

devang (CA FINAL article )     09 September 2011

internal audit mean audit work carrying on without waiting to completion of year . it carry on throught the year without any interval, it is not compulsory,rather it helpful in statutory audit for subtencive procedure.

 

where as statutory audit is requirement of status, it is carrying after completion of accounting year.

CA RITIKA CHHABRA

CA RITIKA CHHABRA (ca)     09 September 2011



   

   



   Following are the main points of difference between internal audit and statutory audit:

1. Appointment – The management of the organization makes the appointment of an internal auditor. The statutory auditor is appointed by different authorities. First statutory auditors are appointed by the shareholders in the annual general meeting.

2. Qualification – Qualifications of the statutory auditor are prescribed in the companies act, 1956. Essentially a person should be a practicing chartered accountant to be appointed as a statutory auditor. There are no fixed qualification for the position of an internal auditor.

3. Objects – The main object of the statutory audit is to form an opinion on the financial statement of the organization auditor has to state that whether the financial statements are showing the true and fair view of the affairs of the organization or not. The main object of the internal audit is to detect and prevent the errors and frauds.

4. Scope – The scope of the statutory audit is fixed by the company’s act 1956. it can not be changed by mutual consent between the auditor and the management of the audited business unit. The scope of the internal audit is fixed by the mutual consent of the auditor and the management of the unit under audit.

5. Remuneration – Remuneration of the statutory auditor is fixed by the appinting authority, I e in case of first auditors, the auditors the directors fix the Remuneration in case of the subsequent auditors the company in its general meeting fixes the remunration. In case of internal auditor the management who appoints him fixes his Remuneration.

6. Report – The statutory auditor submits his report to the shareholder of the company in its general meeting. The internal auditor submits his report to the management of the company who is also his appointing authority.

7. Removal – The procedure of removal of the statutory auditor is very complex. Only the company in the general meeting can remove the auditor. It also has to take the permission of the central government. The management of the entity can remove internal auditor.



2 Like
CA PRAVEEN SINGH

CA PRAVEEN SINGH (MANAGER ACCOUNTS)     09 September 2011

Well written Ritika...

Statutory auditor of the company is appointed by Shareholder in AGM of the company...in every AGM auditor is reappointed.

Internal Auditor of the company is Appointed by management of the company.

Statutory Auditor must be CA.within the CA ACT1949 OF THE CA ACT.

But internal Auditor must not be ca,but generally ca is appointed.

1 Like
Ateeq

Ateeq (CA - Final)     10 September 2011

The major difference can be: -

1. Task being handled by the auditor: -

Internal audit will mainly concentrate on strenthening the internal controls and avoiding all sort of loopholes from the mechanism adopted by the company for smooth functioning (also called as internal controls).

Statutory audit will be governed by any statute say companies act, income tax act and so on... Further statutory audit will concentrate more on compliance matter with companies act or income tax act.

 

2. Reporting authority: -

Internal auditor will report to the company's management all the flaws(if any) of the company and helps in decision making to improve the same.

Statutory auditor will report to the owner's of the company i.e., the shareholders of the company.

 

3. Need; -

Internal auditor will be needed when the company is having large scale operations or complexities in functioning or might be in the interest of the company.

Statutory audit will be mandatory after fulfilling certain conditions mentioned in the companies act and income tax act from time to time.

and So on........

CA PRAVEEN SINGH

CA PRAVEEN SINGH (MANAGER ACCOUNTS)     10 September 2011

Agree with above...

MAIN FOCOUS OF INTERNAL AUDITOR,IS ON INTERNAL CONTROL,IN AREA OF ACCOUNTING.AND REPORT THEREIN...

SCOPE OF STATUTORY AUDIT.& THER AUDIT PROGRAMME IS DEPEND ON,TYPE OF AUDIT REPORT 

PRESENTED BY INTERNAL AUDITOR,CLEAN,QUALIFIED,ADVERSE,NEGATIVE,

INTERNAL AUDITOR PRESENT THEIR REPORT TO THE COMPANY'S MANAGEMENT.

STATUTORY AUDITOR PRESENT THEIR REPORT TO THE OWNER (SHAREHOLDER) OF THE CO.

1 Like
pooja kumari sinha

pooja kumari sinha (CA Final)     17 September 2011

thanks for the help the language was really lucid n easy to understand.          thanks once again:)

1 Like
NANDHINI

NANDHINI (IPCC)     19 December 2011

MY VIEWPOINT:

STATUTORY AUDIT

1.STATUTORY AUDIT IS  FOR STAKEHOLDERS (Including shareholders) OF THE COMPANY  TOPLACE RELIANCE ON THE FINANCIAL

POSITION OF THE COMPANY.

2.THE AUDITORS ARE REPORTABLE TO SHAREHOLDERS WHO APPOINT THEM IN THE AGM.

INTERNAL AUDIT

a. INTERNAL AUDIT IS PERFORMED FOR THE INTERNAL MANAGEMENT TO PLACE RELIANCE ON THE CONTROL SYSTEMS IN

OPERATION AND TO MAKE SURE ABOUT COMPLIANCE WITH APPLICABLE LAWS.

b. THE AUDITORS ARE REPORTABLE TO THE MANAGEMENT WHICH APPOINTS THEM.

 

hema bhanushali

hema bhanushali (staff)     21 March 2012

Which form of audit is better-internal audit or statutory audit? why?

Ateeq

Ateeq (CA - Final)     28 March 2012

Dear Hema,

 

It depends upon the nature of business, its peculiarities, turnover, affordability and governing statute.

Both plays vital role in the matter of assurance and controls and has different grounds of importance.

For further queries do write.

Regards.,

 

narayanan

narayanan (articled assistant)     06 November 2013

Errors and frauds as in what all areas we have to cover for manufacturing clients ??

narayanan

narayanan (articled assistant)     06 November 2013

Errors and frauds as in what all areas we have to cover for manufacturing clients ??


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