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Difference between Internal Audit and Statutory Audit
In case large scale units, Separate audit staff will be appointed by management, such staff members may or may not have professional qualification. It is called internal audit. It can be understood that there will be employer – employee relationship between undertaking and internal auditor. Internal audit capacities the undertaking to detect frauds and errors at an earlier stage. In presence of internal audit, Annual Audit becomes easier.
The audit where there is legal requirement with regard to conduction of audit at every year end – is called statutory audit. It will be conducted by an external person or independent person. Hence this audit is called external audit or independent audit. Here between undertaking and auditor, there will be no employer – employee relationship.
The Internal Audit Staff will be under the control of management. Here is employer – employee relations.
The person conducting external audit no will not be under the control of management. It is so because external auditor is not employee of the undertaking but an independent person.
Internal Auditor may or may not have professional qualification.
Here the external auditor should have the professional qualification as specified by Act concerned.
Rights, Duties, liabilities etc of internal auditor will be determined by management.
External Auditor, rights, duties, liabilities etc will be determined by concerned act itself.
The purpose of internal audit is guiding and assisting the management.
The purpose of external audit is safeguarding the interests of share holders.
It aims at earlier detection of frauds and errors.
It aims at knowing whether financial statements all giving true and fair view or not.
In case of internal audit, the audit work takes place continuously.
Here audit work takes place generally periodically.