Following are the differences between internal audit and statutory audit:-
APPOINTMENT:- Internal auditor is appointed by the management while statutory auditor is appointed by the shareholders except in certain cases when the auditor is appointed by the directors of the company or the government. Appointment of internal auditor is optional while statutory auditor is appointed as per the companies act.
QUALIFICATION:– Internal auditor need not posses the qualification as are laid down under section 226 o the companies act while a statutory auditor must have those qualifications.
STATUS: Internal auditor is an employee of the company while the statutory auditor is an independent person.
CONDUCT OF AUDIT:- An internal audit is a kind of continuous audit while a statutory audit is generally conducted after the preparation of the final accounts.
SCOPE OF WORK:- The scope of work by the internal auditor is determined by the management while the scope of the work and responsibilities of the statutory auditor are determined by law.
OBJECTIVE:- An internal auditor has the primary duty to find out whether any error or fraud has been committed while the statutory auditor has to report whether the balance sheet and the profit and loss account of a company have been drawn up as per law.
DETERMINATION OF DUTY:– The scope of duties of an internal auditor can be reduced while it is not so in the case of statutory auditor.
SUGGESTIONS:– Internal auditor has to make suggestions to the management as to how to run the business efficiently but a statutory auditor need not do so unless he is specifically asked.
METHOD OF CHECKING:- Internal auditor has to check all the transactions while the statutory auditor may apply test check.
REPORTS:- Internal auditor has not to submit any report to the shareholders while a statutory auditor has to do so.
APPLICATION OF CHARTERED ACCOUNTANT ACT:– Internal auditor can not be prosecuted for professional misconduct unless he is a chartered accountant while statutory auditor can be prosecuted.
REMOVAL:- Internal auditor can be removed by the management or the directors while a statutory auditor can be removed only by the shareholders and not by the management or the directors.
AS WATCH-DOG:– The internal auditor acts as a watch-dog for the directors while the statutory auditor has to act as a watch-dog for the shareholders.
SATISFACTION:– Internal audit is carried out for the satisfaction of the management while the statutory audit is carried out for the satisfaction of the shareholders and third parties for the financial data.
REMUNERATION:– Remuneration of the internal auditor are fixed by the management while for the statutory auditor the remuneration is fixed by the shareholders.
ATTENDING THE MEETING:– Internal auditor has no right to attend the meeting of the shareholders while a statutory auditor has such right.
ACTIVITIES:– The activities of the internal auditor are continuous while those of statutory auditor are periodic, usually for a year.
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