Internal Audit vs Statutory Audit Meaning, Functions, Differences

This helps to limit the fraud risk in the organisation and helps improve the different systems and business processes of the various organisations. Internal auditor submits his report to the management of the company who is also his appointing authority. Of an enterprise which is legal obligation to have an audit of its accounts, appointment of the statutory auditor is compulsory. Statutory audit is done by the practicing-chartered accountants having operations outside the company while internal audit can be done by the employee of the company. Statutory Audit – Certain organisations are established under specific legal enactments and their working is also governed by the provisions of the enactments. It is legally mandatory for such organisations established under various enactments to get their accounts audited.

  • This field is very detailed in terms of processes and controls and you don’t have to adhere to changing regulations unless the firm requires you to.
  • Statutory audit is usually conducted for various purposes like tax regulatory requires it for taxation purposes.
  • These differences above outline how crucial both the audits are for building a company’s reputation.
  • An internal audit can check any potential threats or financial losses.

If you want knowledge of the law, the regulations, and the of country’s government then a statutory audit is the best. Internal audit is very detail-oriented though, you find problems with the company’s accounting system and controls and you are the one to provide the entity with solutions. This field is very detailed in terms of processes and controls and you don’t have to adhere to changing regulations unless the firm requires you to. With this a few pros and cons, I sincerely hope you get a better solution. Internal Audit – The periodic checking of the accounts of an institution or a company from time to time by its internal auditors is called Internal Audit.

To view a simple single page list of the documents required, click here. You may wish to click here – the cost of an annual audit page – to know how much a quarterly or interim audit would cost. They make recommendations to get rid of bottlenecks, mitigate risks, and as a result they create sure that systems and processes are improved. Firstly, this is applicable to risk management systems, control, and company governance. Internal audit staff conducts an independent assessment of all systems and processes of the organization from the purpose of view of how effectively current tasks are being solved and goals are being achieved. But, as practice shows, without basic teaching, it’s difficult to induce into the profession and establish itself in it.

Tax Audit is a conditional audit, conducted under the regulations of Income Tax Act. It is an external audit performed by a chartered accountant specially appointed for the organisation’s purpose. His duty is to render an opinion on truth and fairness of the assertions under his review. More experienced internal auditors are required to think big, be highly qualified in a minimum of one direction, have developed communication skills, have high ethical principles, be stress-resistant, etc. ClearTax offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India.

Statutory auditor qualification is specified under the provision of law but for internal auditors, there is no specific qualification required. Statutory audit, also known as financial audit, is one of the main types of audits which is to be done as per the statutes applicable to the entity. Its major goal is to gather all relevant data so that the auditor may render an opinion on the truthful and fair representation of the company’s financial status as of the balance sheet date. Public enterprises, banks, brokerage and investment organizations, and insurance companies are all subject to audits. In the statutory audit process, evaluation of corporate procedures by a specialist conducting regulatory audit and also operating mechanisms for fraud or prevention of error are included.

You may click here to refer to annual audits till we upload the information tailored to suit audited interim financial statements on this page. The International Accounting Standards are applicable for maintaining all types of accounts. Internal audit is additionally a dynamic management tool that permits you to feature value to your business, whether or not this activity has no direct link with customer satisfaction.

As a result, municipalities are responsible for conducting a statutory audit. Every company keeps the details of their financial transactions for future use. These financial statements prepared by the accountants are verified during the statutory audit and internal audit.

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There is afocus on helping the business move forward– so expect there to be recommendations for improvement. Theinternal auditagenda is set internallyin the light ofthe business’srisks and objectives. The scope of the statutory audit is determined by the law applicable to the enterprise under audit. Vakilsearch is India’s largest provider of legal, secretarial, accounting, and compliance services.

distinguish between internal audit and statutory audit

Statutory Auditors work for the shareholders and give their audit reports to them. Internal Auditors submit their audit reports to the company as they work for the sake of the company. Statutory Auditors can be removed only with the consent of the government while Internal Auditors can be removed by the company.

Why are Accurate Calculations Important in Accounting and Bookkeeping?

They perform a test on account balances to check if the financial reports are error-free and comply with the regulatory standards, statutory principles and industry practise. This audit is conducted to check whether the enterprise has complied with all the rules and regulations laid down by the CBEC in respect of GST. Also, whether the organisation has duly collected and paid the GST on time. The auditor includes a comment on the organisation’s internal control, whether they are there and working efficiently or not. He also advises the organisation about the areas where internal control is weak, and risk is more.

Many are times when we want to make timely financial reporting and data collection and this is impossible without an internal audit. An internal audit is used to provide assurance that an organization’s risk management, governance, and internal control processes are running smoothly. An internal auditor is a person who is appointed to check the overall performance of different companies with respect to the administrative, financial, and legal standards they follow. The statutory audit in India ensures compliance with laws which helps to maintain accurate and timely financial reporting. Internal auditors after completion of audit report to the management while statutory auditor reports to the shareholders.

It is a strict regulation by the government to perform statutory audits. It is a deep and careful examination of financial statements in order to spot the minutest errors and fraud activities. Managers and accountants make several mistakes while creating the financial statements and reports of the company or business. The regular checks, inspection, examination, and rectification of the errors of a company’s financial statements or accounts is known as an audit.

Statutory audit means the regular inspection, examination, and assessment of the accuracy and fairness of the accounts of an institution . You may also click here for the annual audit fee estimator and provide the details of your quarterly results here. Where the amounts exceed AED 20 million, substitute with USD figures and apply that currency to the audit fee too.

What Are Internal And Statutory Audits? The Key Differences Between Internal Audit And Statutory Audit

Send an email to any of our auditors on our team or call any of them on their phone numbers – their details are given in the people section of our website. Internal audit in a very company is initiated and arranged by its owners, managers, and investors. Typically, the objects of verification are finances and their sources, material resources, employees, products that the corporate produces, and the way it’s managed. Thus, in modern conditions, the difficulty of managing the financial resources of an economic entity because the main and priority variety of resources involves the fore. In market conditions, the premise for the stable position of any economic entity is its status, the measure of which is its financial stability. Internal audit is a very important a part of the organizational structure of the corporate, and its role, a minimum of within the medium term, will increase.

We have successfully worked with over 5 lakh customers, and have now registered over 10% of all the companies registered in India. A non-specialist cannot differentiate between an internal audit and a statutory audit. In every field, institutions try their best to give their audience or clients a work free of errors. In businesses, in different departments also, checks and inspections are done to avoid any last-moment errors. This practice of removing the flaws was initiated and made common while maintaining accounts.

distinguish between internal audit and statutory audit

The audit provides a degree of safety and helps manage risk emerging from fraud, abuse of power, or any other scenarios. An internal auditor provides the management with their objective assessment of the processes and accounts. The management can improve their operational and financial performance using the services of an internal auditor. Internal audit refers to an independent service to evaluate an organisation’s internal controls, its corporate practices, processes, and methods. An internal audit helps in securing compliance with the various laws applicable to an organisation. An organisation can prepare its accounts and records as per the applicable legal requirements and reporting.

An internal audit can be on an annual basis or monthly or quarterly. In certain cases, a company should mandatorily appoint an internal auditor, such as under the Companies Act, 2013. There are different types of assessment or analysis techniques an internal auditor may adopt for performing an internal audit. There may be a need to identify employee rotation between different roles and functions. An internal audit can check any potential threats or financial losses.

Getting an Understanding of the Internal Control Systems

Companies and organizations perform numerous types of audits to ensure that they are operating within the law’s guidelines. Statutory Audit means a type of audit mandated by the law or a statute to make sure that the book of accounts is true and fair as presented to the public and regulators. This is conducted as per the provisions under Companies Act or even Tax Audit under Section 44AB of the Income Tax Act.

Reverse charge mechanism in GST

Auditing services in Delhi also help the corporate achieve its goals by employing a systematic and consistent approach to assessing and improving the effectiveness of risk management, control, and company governance processes. An internal auditor is generally appointed by the management but statutory auditor is appointed by the shareholders or Annual General Meeting. A statutory auditor is an independent person who is appointed by the shareholders but the internal auditor is the staff of the company. A non-statutory audit is the review and verification process of the business of a company and it is not required by any law or statute. The non-statutory audit is a type of audit that is performed to identify an organization’s weaknesses that may hamper the productivity and also the efficiency level of the business.

The review account balances to see if financial reports are error-free and follow regulatory standards, statutory principles and industry practices. Statutory Auditors are usually employed in the National Audit offices. It is their responsibility to perform mandatory audits in governmental bodies and public sector companies. They also perform audit in certain private companies for its shareholders. Internal audit is often seen as being big company stuff – small and medium sized businesses usually can’t justify an in-house internal audit function, howeveroutsourcing provides a flexible cost effective solution. Usually, the same information that is required for an annual audit is required for an interim audit.

Small and medium-sized businesses can get assistance from experts on accounting methods/practices via the MSMEx business education platform. The shareholders decide the pay and remuneration of the statutory auditor, whereas the fees or pay is fixed through the management’s decision. After getting distinguish between internal audit and statutory audit a glimpse of both the audits, it is important to look into what these two audits mean and the differences between an internal audit and a statutory audit. The International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants is applicable for all audit engagements.

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