Understanding the Differences between Internal Audit and Statutory Audit Marg ERP Blog

Furthermore,the scope of duties of Internal Auditors can be reduced while those of StatutoryAuditors cannot be altered. They are responsible for carrying out mandatory auditsin public sector companies and governmental bodies. Furthermore, they conduct auditsin a number of private companies on behalf of the shareholders.

• Power and MandatesInternal staff members or outside consultants that the company hires can carry out internal audits.
• The two main kinds of audits that organisations perform are statutory audits and internal audits.
• The frequency of audits depends on the organization’s needs and regulatory requirements.
• While Statutory Auditors are independent employees from an independentbody, Internal Auditors are part of the workforce of a company.
• Statutory audits, on the other hand, are required every year and must be carried out in order to comply with regulatory standards and preserve investor confidence.

What is the difference between Big Four and mid-sized firms?

They are often a better fit for SMEs, private companies, and growing businesses seeking quality, industry expertise, and greater flexibility in service and pricing. Deloitte’s ability to link audit with advisory and financial insight can be a real asset, especially for growing businesses with a strong foundation that are managing cross-border risks or preparing for their next big move. Most reviews come from individuals with limited interactions, such as those seeking personal support, which doesn’t reflect the experience of Deloitte’s core corporate clients. Given the firm’s global scale, the relatively low number of reviews further suggests that Trustpilot isn’t a representative platform for evaluating a large professional services firm. Qualified auditors are defined under sections 35 and 36 of the Financial Reporting Act 2013.

Internal audit is an independent and objective evaluation of an organization’s internal controls, risk management, and governance processes. The purpose of internal audit is to provide assurance to management and the board of directors that internal controls are effective and risks are managed appropriately. On the other hand, statutory audit is a mandatory audit required by law or regulation.

Key Characteristics of Statutory Audit:

Internal audit recommendations are advisory in nature, whereas statutory audit reports provide a formal opinion on the financial statements, impacting stakeholder decisions. Internal auditors work closely with management, fostering collaboration and continuous improvement. Statutory auditors maintain independence to ensure objectivity and impartiality in their assessments. Internal audits focus on operational efficiency, internal controls, and proactive risk management, offering management valuable insights for continuous improvement. Statutory audits, mandated by law, emphasize the accuracy of financial statements and compliance, ensuring transparency and accountability to external stakeholders.

How Frequently Should Organizations Conduct Audits?

Statutory audits, on the other hand, are legally mandated external reviews performed by independent, qualified auditors. These audits aim to provide an objective assessment of a company’s financial statements, ensuring they are presented fairly and comply with applicable accounting standards and regulations. This independent verification enhances stakeholder confidence and promotes transparency in financial reporting. Internal audit and statutory audit are distinct yet complementary components of the auditing process.

• A management letter is a report issued by an auditor to management, detailing findings and offering recommendations for enhancing internal controls and operational efficiency.
• The main aim of Statutory Audit is to report whether a company’s balancesheet as well as the profit and loss account meet a specific set of regulationsset by the law.
• They are responsible for carrying out mandatory auditsin public sector companies and governmental bodies.
• Internal audits focus on operational efficiency, internal controls, and proactive risk management, offering management valuable insights for continuous improvement.

For example, the external auditor would review XYZ’s financial statements to ensure that they are prepared in accordance with generally accepted accounting principles (GAAP). The auditor would also review the company’s internal controls to ensure that they are effective in preventing and detecting fraud and financial misstatements. When it comes to auditing, both the statutory audit and the internal audit are important processes.

Scope and Focus

Generally, the role of an internal auditor is to provideindependent assurance that a company’s risk management, governance and internalcontrol processes are operating effectively. An audit is an examination of an organization’s financial records and operations to ensure compliance with laws and regulations, and to provide assurance that financial statements are accurate and complete. Internal auditors are salaried employees or consultants hired by the organization, so their fees are included in the organization’s operating expenses. In contrast, statutory audits are usually more expensive because the organization is required to pay the fees of the independent auditor appointed by the regulatory body or government agency.

Let’s take a look at how these two types of audits interact and what impact each has on each other. Power and MandatesInternal staff members or outside consultants that the company hires can carry out internal audits. Generally, the organization’s management receives reports from the internal audit team. Statutory audits, on the other hand, are completed by independent auditors who are chosen by regulatory agencies or shareholders and who submit their findings to both. In the context of financial management and corporate governance, audits are essential for guaranteeing efficiency, accountability, and openness. Internal audits and statutory audits, the two main forms of audits, have different functions but are equally important to an organization’s ability to run smoothly.

Their audit reports are imparted to the senior administration of the region of their assessment. These reports call attention to ways interior controls can be advanced and thoughts for smoothing out tasks. RSM Hong Kong is a member of RSM International, one of the largest global networks of audit, tax, and consulting firms serving the middle market. Established in Hong Kong in 1975, the firm has built a reputation for combining technical expertise with practical business advice.

Among various forms of audits, internal and statutory audits stand out as two core components, each serving distinct yet complementary functions. The scope of a statutory audit is defined by the relevant regulatory body or government agency that mandates the audit. Typically, it encompasses a thorough review of the financial statements and accompanying notes, ensuring comprehensive scrutiny of the organization’s financial health. During an audit of the company’s procurement process, the Internal Audit team may review the procurement policies and procedures, examine purchase orders, and verify that the company is obtaining goods and services at the best possible price.

Given the large volume of feedback, this rating offers a credible view of the firm’s workplace environment. An employee’s review score of 4 out of 5 is very high and reflects a strong employee experience, though based on a relatively small number of reviews. Comments often highlight a supportive culture, good work-life balance, and opportunities for growth. BDO has separate Trustpilot pages for each region, such as the UK and Denmark, so it would not be fair to include a single score here. Ratings across regions are generally low, but most reviews come from individuals and do not necessarily reflect the quality of service provided to BDO’s core corporate clients. Conclusion is expressed in a negative form, e.g. “Nothing has come to our attention that causes us to believe that the financial statements are not free from material misstatement.”

While statutory audit is focused on ensuring compliance with applicable laws and regulations and providing assurance to shareholders and other stakeholders. The responsibility for conducting these audits differs, with internal audit being conducted by an internal auditor appointed by management and statutory audit being conducted by an external auditor appointed by shareholders. Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. The primary objective of internal audit is to assess and enhance the effectiveness of risk management, control, and governance processes.

The internal audit team would recommend process improvements to management to address this weakness. However, this weakness may not difference between statutory audit and internal audit necessarily result in a material misstatement in XYZ’s financial statements. Baker Tilly Hong Kong is a full-service accounting and advisory firm and a member of the global Baker Tilly International network. With a history in Hong Kong dating back to 1977, the firm provides audit and assurance services alongside tax, advisory, and corporate support, with a strong focus on mid-sized enterprises and compliance with Hong Kong accounting standards.