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Thursday, March 28, 2024

Difference Between Internal And Statutory Audit In India

Statutory audit is significantly different from an internal audit and that is why you will need to hire one of the best audit firms in India for this purpose. This may seem to be an unnecessary expense to one who does not know the difference between the two types, the working process and consequences for non-compliance. Well, internal audit as the name suggests is very much related to the business and its management. The primary objective of this audit is to consider whether the business practices are good enough to manage the business and are helpful meet its strategic objectives. It covers both financials as well as business operational issues.

Impartial and fair view

Since internal audit is mostly done keeping the business in mind, there is a fair chance of partiality in it. On the contrary, statutory audit is required to have a fair and impartial view of the business and make sure that the report is authentic and prepared in compliance with the many different legal requirements. The entire process it is conducted by a practicing and certified Chartered Accountants who specialize in it. The process of statutory audit in India is not as limited as the internal audit. It involves governance of the business organization, operations, risk tolerance and management and much more.

Statutory audit features

Statutory audits are usually very complex and tedious in which the top audit companies in India act as the part of an external audit process. Their prime objective is to focus on the different financial accounts. They also go beyond the domain of finance and look for the risks in the business. Usually, the statutory auditors are appointed by the shareholders of the company with intent to have a fair vies of the financial accounts as well as provide necessary opinions to improve the operation as well as financial position of the business. This process provides the shareholders with an opportunity to examine and evaluate the internal controls of the business and to make sure that everything is working according to the plans intended.

Features of internal audit

Internal audit may sound similar but it involves company employees who report directly to the audit committee. Their primary function involves a wide area of operation that includes both financial as well as non-financial aspects of the business. They follow the annual audit plan of the business looking mainly into the major risk factors of the business and the actions that are being taken to cope up with these risks in the most effective manner. Such risks may include the reputation of the company, employing cheap labor in foreign countries, producing too many products considering the available resources and others.

Functions of auditors

When you hire one of the best audit firms in India for statutory auditing they will follow specific duties such as report to the members on all annual financial statements, identify audited financial statements, check the auditing standards used, give opinions, inquire management or others to know about any fraud or error, evaluate internal control system, perform analytical procedures, test supporting documentation, observe physical inventory count and confirm accounts receivable with the third parties.

Exemption from audit

Under section 711 of the Act few companies are exempted from such audits. You are exempted if your company is small and your turnover is not more than fifty million shillings and the net value of its net assets is not more than twenty million shillings. You may also get exemption under section 714 if your company is dormant since its formation or in the previous year. Therefore, hire a professional to know when you need a statutory audit for your business benefits.

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