Difference Between Internal Audit and Statutory Audit
Although there is a certified public accountant appointed by all organizations so as to keep track of all the monetary transactions as well as for the keeping of pounds in general, firms have to pass across an audit which is a kind of exam of the financial states of the society established by the accountant. This lawful control of count is performed by virtue of the dispositions of Companies Act of1956 (to give opinions in accordance with the article 227 of Law). This lawful control of count is a tool to safeguard the interests of the stockholders of the company to be sure that the organization is financially undergoing satisfactory performance. However firms which acquire an internal audit performed also have to be sure those they follow rules and regulations of accountancy and to prove that statements prepared by the accountants must be checked. Difference in an internal audit and statutory audit will be put across this article.
Internal audit is not obligatory and it is the choice of the direction of the firm to make it by his internal controllers. Direction does not want to be the red face in case of possible changeability during lawful audit and explain why that happened. To keep a control of the operations of the firm, internal audit is performed. Whether it is an internal audit been performed or not, Statutory audit is made for the effectiveness of the financial states of the firm. It is necessary to be sure that the firm follows rules and regulations in the assertion and no compromise with the financial interests of the stockholders is undergoing.
The most obvious difference is the domiciles in the nomination of the controller. Although the internal controllers are named by the direction of the firm, auditors are named by the stockholders of the firm. Another difference is the domiciles in skills of the listeners. While it is obligatory for the auditors to be certified as recognized accountants, he is not necessary for internal audit and director can name persons that he considers opportune.
The main objective of the statutory audit is to give a fair and uncommitted valuation of the financial performance of the organization at the same time to try to spot distances and fraud. Audit commits also attract to disclose anomaly and errors which can have slipped into the financial states. There is no means through which the internal management can be able to change the range of the statutory audit as it is case with internal audit, where the mutual consent of management and auditors is sufficient to decide on the range of the financial year to be checked. While the listeners of a lawful control subject their final report to the stockholders in their general meeting, the report of internal audit is put forward to the management. Once a statutory auditor has been appointed by an organization, it is quite difficult to fire him without the prior permission of the central government, even after the recommendation of the proposal by the board of directors of that organization. On the other hand, management can withdraw internal listeners at any time.