Statutory Auditors are a part of the external audit process. External and Statutory Audit Governing bodies need an auditor they can trust to help them manage risk and improve operations, as well as ensure compliance with regulatory and other obligations. The non-statutory audit is the audit of financial statements that are not required by law. Statutory audit is authorised and governed by law or a statute; whereas the audit got done voluntarily and without any legal or statutory force is non-statutory. Instead, they complement one another. Legal Requirement. A "statutory audit" is a legally required review of the accuracy of a company's or government's financial records. External Audits. Statutory audits are the opposite of voluntary audits. Internal audit is not regulated, can be used more flexibly and may well look at areas that fall under the external audit … It is a legal requirement as per the state or national laws prevalent in the region. Internal Audit provides an opinion on the effectiveness of operational activities of the organisation. This kind of engagement, the auditor will have to identify the scope, objectives, and responsibility with the entity. Statutory Auditors are a part of the external audit process are focused on the various financial accounts or risks associated with the domain of finance and are appointed by the shareholders of the company. An audit is an examination of … It is an audit by a practicing CA which has its operations exterior to the organization which it is auditing. Similarities between Internal Audit and External Audit: The basic auditing process of both of the internal audit and external audit is almost same. This could help the entity not only comply with the law but also prove its transparency to the government. Appointment . In internal audit, the result granted by the auditor is for the organization itself, for internal use; in the external audit, the opinion is intended for third parties interested in said information. Statutory Audit increases the credibility of the business and helps to improve the business process. Watch Queue Queue. However, for statutory audit, even though the board or shareholders don’t want, the entity still has to engage. Internal audit and external audit are the two main components of the audit process. Statutory audit is the engagement of an audit of financial statements by independent auditors to the entity’s financial statements as the compliance with the local law that the entity is operating. Internal Audit vs Statutory Audit. And the entity that operated in those countries is required to submit the audited financial statements as per the law requires. Statutory Audit is done by the Practicing Chartered Accountants having their operations external to the Company whose audit they are performing Whereas Internal Audit can be done by the employee of the Company. Whether you’re looking to have a career in audit or you’re a … A "statutory audit" is a legally required review of the accuracy of a company's or government's financial records. Introduction to Uniform system of accounts, D. Contents of the Balance Sheet (under uniform system), F. Departmental Income Statements and Expense statements (Schedules 1 to 16), A. We are committed to finding out what you think and surveying the business community at large. 1         What is the purpose of the audit? Statutory audit is an audit by a practising Chartered Accountant which has its operations exterior to the organization which it is auditing. The role and value of internal audit should be better recognised within the UK Code of Corporate Governance and guidance issued under it by the Financial Reporting Council (FRC), with regard to publicly listed private sector organisations.Regulators rightly recognise that the Audit can be grouped into two categories, namely, Internal Audit and External Audit. It is different from the statutory audit that the entity needs to engage with an audit firm to perform its review in financial statements. The internal audit is disqualified to give public faith, on the contrary that the external audit. Conversely, External Audit aims at analysing and verifying the accuracy and reliability of the financial statement. An introduction to Internal and Statutory Audit, B. Watch Queue Queue Most of the time, governments or accounting bodies require companies to perform an external audit under their laws. External audit services. Let us discuss some of the major differences between Audit vs Assurance: 1. Because it is the law requires. Internal Audit vs Statutory Audit. How to Calculate Accumulated Depreciation? Let us explore the scope and advantages of a statutory audit Let us know if you liked the post. External audits and internal audits are not opposed to each other. The main objective of a statutory audit is not different from other financial statements auditing. If the entity doesn’t engage with the external auditor to review their financial statements, then the entity may face legal enforcement from the authority. 4         Who does the auditor report to? The audit marketplace is continuing to change and our stance is, and has always been, to ensure that regulation reform does not adversely affect you. Statutory Audit is the audit of complete accounting records. They are usually performed on at least an annual basis to provide the annual statutory audit of the financial accounts. The auditor may need to state their approach that they will be used to perform their review. With statutory audits, companies do not have an option to avoid audits. This audit could prove to the government that their financial statements fully comply with the required standard and frameworks. Distinction between Internal Audit and Statutory Audit, C. Implementation and Review of internal audit, A. Managing Entrepreneurship, SME Properties, At following points, Internal and External/Statutory Audit differs:-. That’s the only way we can improve. For example, the insurance companies required to submit their financial statements to a related government body to review. Committed to clients. External Auditor may use the work that is conducted in the internal audit if he thinks fit. In India, the term "statutory auditor" refers to an external auditor whose appointment is mandated by law. Its primary purpose is to gather all relevant information so that the auditor can give his opinion on the true and fair view of the company’s financial position as on the balance sheet date. In India, the laws regarding a statutory audit are in the Companies Act, 2013. Differences in a Nutshell Internal audit is carried out by the people working in the firm themselves, while external audit is conducted by people who are working for a private firm. An external auditor is a member of recognized professional accountancy bodies and normally address their reports to the shareholders of a corporation or to the owners of the business entity. The key difference between internal and external audit is that internal audit is a function that provides independent and objective … Still, it will not reduce the scope and the responsibility of the external auditor. This is because of shareholders’ requirements, the board of director’s requirements, management requirement or some time it is because of parent company requirements. Conversely, Tax Audit is the audit … Engagement period, reporting deadline, audit fee, and other important information need to properly state in engagement later. The audit is the process of examination of the accounting information closely which is presented in the financial statements of the organization. This video is unavailable. pwc.ch. It is to enable the qualified auditors to examine the entity’s financial statements’ independence and objectively and then express their opinion on the financial statements. Though there is an accountant in all organizations to record the financial transactions and for general book keeping, companies have to pass through an audit that is a sort of scrutiny of the financial statements of the company prepared by the accountant. Qualification. Because it is the law requires. 5        What sort of report will they receive? 2. Introduction to Uniform system of accounts, Definition and objectives of Internal Control, Implementation and Review of Internal Control, An introduction to Internal and Statutory Audit, Distinction between Internal Audit and Statutory Audit, Implementation and Review of internal audit, An introduction to departmental accounting. However a Company can appoint an independent outside firm of CA to do its internal audit. The main objective of the non-statutory audit of financial statements is the let an independent auditor review and then express their opinion based on the result of their works. An external audit focuses on finance and the key risks associated with the business’ financial business. The objectives of the external auditors are defined by statute. Internal audit is the need of management but it is not legal obligation but statutory audit is the legal requirement. 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