Difference between Internal Audit and Statutory Audit

Difference between Internal Audit and Statutory Audit

 

Nature of Difference Internal Audit Statutory Audit
1. appointment Internal auditor is appointed by the management. The external auditor is appointed by the shareholder except in certain cases when he is appointed by the director or government.
2. optional or obligatory Appointment of internal auditor is optional. Appointment of statutory auditor is obligatory.
3. qualification No special qualification is required for the appointment of internal auditor.

 

Statutory auditor must possess the qualification as required by the ‘company ordinance 1984.1
4. status

 

Internal auditor is an employee of the company. Statutory auditor is an independent person.
5. conduct of audit An internal audit is a kind of continuous audit. Statutory audit is generally conducted after the preparation of final account.
6. scope of work Scope of the work of the internal auditor is determined by the management. The Scope of work and responsibilities are fixed by the laws.
7. objective An internal auditor has the primary duty to find out whether any error or frauds has been committed. Statutory auditor has to report whether the balance sheet and the profit and loss account of a company have been drawn up in conformity with law and whether they show true and fair view of the state of affairs of the company.
8. determination of duty The scope and duties of an internal auditor can be reduced. The scope and duties of statutory auditor cannot reduce.
9. suggestion to management Internal auditor has to make suggestion to the management as to how to run the business efficiently and avoid wastage. Statutory auditor need not to do so unless he is specifically asked.
10. extent of checking Internal auditor has to check all the transactions. Statutory auditor may apply test checking.
11. report Internal auditor has not to submit any report to the shareholder. Statutory auditor has to submit a report on audited accounts to shareholders.
12. application of chartered accountant act Internal auditor cannot be prosecuted for professional misconduct unless he is a Chartered Accountant. A statutory auditor can be prosecuted for any negligence in the performance of his duty.
13. removal Internal auditor can be removed by the management or director. Statutory auditor can be removed by the shareholders.
14. satisfaction Internal audit is carried out for the satisfaction of the management of the concern. Statutory audit is conducted for the satisfaction of the shareholders.
15. remuneration Remuneration of the internal auditor is fixed by the management. Remuneration of the statutory auditor is fixed by the shareholders.
16. attendance at meeting Internal auditor has no right to attend the meeting. Statutory auditor has a right to attend the meeting.
17. activities The activities of the internal auditor are continuous. The activities of statutory auditor are periodic, usual for a year.
18. watch-dog The internal auditor act as a watch dog for the management. Statutory auditor act as a watch dog for the shareholders.

 

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