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Query on Internal audit and Statutory Audit

Anil (1638 Points)

24 June 2008

1) How is Internal Audit different from Statutory Audit apart from the fact that the scope of internal audit is determined by management whereas statutory audit is done mainly to give his opinion on matters mentioned u/s 227 of companies Act.

2) Also please let me know how auditor’s approach changes in conducting the above two audits.

Kindly answer question wise.

Thanks.

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10 Replies

shreehari lath (CHARTERED ACCOUNTANT) (20 Points)
Replied 25 June 2008

Internal Audit as the term denotes is an audit for assessing the internal affairs and control, may be inhouse or exteranl agency, its always at the discretion of management. Whereas the statutory audit is required by a statute. May be Regular audit under the provisions of Companies Act, 1956 or any other statute. In case of entities other than coporate, like cooperative societies, the memorandum requires an audit be conducted on an annual basis . Statutory audit are conducted always by an entity outside the auditee entity.

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jacob (Audit ) (81 Points)
Replied 03 July 2008

Any Business constitutes of Money and Risk. As a internal auditor you have to safeguard the money (Assets)of the business and keep the risk at minimum in every transaction that the business enters into and give an assurance to the management that money/asset is safe and risk are at minimum. There are various techniques by which you can do this and give assurance to the managment . This is were the skill of IA lies. which needs specialisation and indepth study and experience on internal audit.

regardsa

jacob

jacob (Audit ) (81 Points)
Replied 03 July 2008

Auditors approach changes with the obvious reason that the scope of audit varies in both cases. A internal auditor is not binded by any statutory compaliance and has to verify the transactions from a owners/managment perspective as if he is the person who is investing the money. Where as a statutory auditor is binded by statutory regulations and has to restrict his verification to complaince with statutory checklist.

CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 03 July 2008

I would guess that a statutory audit is done in accordance to law. It's mandatory. An internal audit is done by the company or person for their own purposes.

Statutory audit refers to the mandatory audit in order to certify that the annual financial statements are true and fair whereas internal audit is carried out to evaluate the internal controls and checks of an organisation.

Statutory audit is a mandatory external requirement which checks that the accounts present a true and fair view of the financial position.

Internal Audit is a service to management and to Council. It evaluates the effectiveness of the systems and procedures within the Organisation. The internal auditors report to the Registrar and Secretary, and the Audit Committee on the systems of governance, risk management, internal control and value for money. This means the scope of the work is much wider and covers a number of non-financial areas used within the organisation.

Vidit Seth (Practicing CA) (76 Points)
Replied 09 December 2008

internal audit is also mandatory for all listed companies

and for other companies if:

1) The paid up capital and reserves are more than Rs 50 lacks as at the commencement of the financial year , or

2) Avg annual turnover exceeds Rs 5 crore for a period of three consecutive financial yrs immediately preceeding the financial year.

, as per Clause 4 of CARO 2003

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abhishek bhatt (CA student) (136 Points)
Replied 23 December 2008

it is not as per caro 2003 but also as per AAS-7"Relying upon the work of internal auditor".

Nandesu (Asst Manager - F&A) (28 Points)
Replied 30 July 2009

Originally posted by :vidit
"	internal audit is also mandatory for all listed companies and for other companies if: 1) The paid up capital and reserves are more than Rs 50 lacks as at the commencement of the financial year , or 2) Avg annual turnover exceeds Rs 5 crore for a period of three consecutive financial yrs immediately preceeding the financial year. , as per Clause 4 of CARO 2003	"

nishit (Artical) (28 Points)
Replied 22 June 2010

please provide me audit checklist for co-operative society

Aakash Goel (Consultant) (21 Points)
Replied 20 February 2011

Hi i would like to ask, whether statutory audit has a brighter future than internal audit or internal audit people have a better scope.

Best Regards

DIPESH VASA Helping Hand!!!!! (CA FINAL ) (441 Points)
Replied 23 July 2011

Originally posted by : Aakash Goel
	Hi i would like to ask, whether statutory audit has a brighter future than internal audit or internal audit people have a better scope. Best Regards