What is difference between Internal Audit and Statutory Audit?
Statutory audit and Internal Audit are closely similar as regards the internal control system, ascertainment of adequacy and effectiveness of the accounting system so that its output is reliable, verification of assets and liabilities, means of examination i.e. observation, inquiry, testing, statistical comparison etc.
Internal and Statutory audit differ in the following respects:
Internal Audit is not compulsory. In case of a specified company whose paid up capital and reserves exceed Rs.50 lakh or whose average annual turnover in the three financial years preceding the present financial year exceeds Rs. 5 crore, internal audit it compulsory.
The internal auditor is often an employee of the enterprise.
The internal auditors approach is governed by his duty to ensure that the accounting system is adequate and effective such that the information presented to the management from time-to-time discloses all material facts.
The internal auditor who is the employee of the organization is only responsible to the management
The scope of Internal audit is determined by the management and may be enlarged of entailed at will.
Of an enterprise which is legal obligation to have an audit of its accounts, appointment of the statutory auditor is compulsory.
The statutory auditor is independent of the enterprise which engages him.
The statutory auditors approach is determined by the relevant law. His duty is to render an opinion on truth and fairness of the assertions under his review.
The statutory auditors responsibility is primarily towards the owners who have appointed him, through it may extend to the third parties also who have acted on the faith of his opinion as regards the financial statements examined by him.
The scope of the statutory audit is determined by the law applicable to the enterprise under audit.