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Tuesday, 20 September 2011

What is the difference between internal auditor and external auditor or statutory auditor? or difference between external audit and internal audit

INTERNAL AUDIT :-
Internal audit means a continuous critical review of financial and operating matters of a business. In other words, we can say that the audit of a business conducted by the business for a continuous basis. Internal audit is done by the internal staff appointed particularly for the audit purposes. These are called internal auditors.

EXTERNAL AUDITOR or STATUTORY AUDITOR :-
If an independent auditor examines the books and records of the company on the behalf of the shareholders, it is called external audit. While auditor is called statutory or external auditor.

Nature And Field Of Work (Common) :-
In case of accounting matters both the auditors work is largely in the same field. They have common interest in finding the errors and detecting the frauds. Both want to know the correct and true financial statements.


DIFFERENCE BETWEEN INTERNAL AUDIT or AUDITOR AND EXTERNAL AUDIT or AUDITOR

1. Appointment :-
Internal auditor : Internal auditor is appointed by the management of the company.
External auditor : External auditor is appointed by the shareholders of the company.

2. Legal Position :-
Internal auditor : Legally internal audit is not compulsory.
External auditor : External audit is compulsory by law.

3. Status Of Auditor :-
Internal auditor : Internal auditor is employee of the company.
External auditor : External auditor is an independent person.

4. Qualification :-
Internal auditor : For internal auditor any specific qualification is not compulsory.
External auditor : For external auditor specific qualification is compulsory.

5. Submission Of Report :-
Internal auditor : Internal auditor has not to submit any report.
External auditor : External auditor submits report to the shareholders.

6. Fixation Of Remuneration :-
Internal auditor : Internal auditor remuneration is fixed by the management of the company.
External auditor : External auditor remuneration is fixed by the shareholders of the company.

7. Name Of Remuneration :-
Internal auditor : Internal auditor receives salary.
External auditor : External auditor receives audit fee.

8. Nature Of Checking :-
Internal auditor : Internal auditor checks all the transactions.
External auditor : External auditor may apply test check.

9. Right Of Attending Meeting :-
Internal auditor : Internal auditor has no right to attend the meetings of the company's shareholders.
External auditor : External auditor has a right to attend the meetings.

10. Kinds Of Audit :-
Internal auditor : Internal audit is kind of continuous audit.
External auditor : External audit is conducted after the preparation of final accounts.

11. Guidance :-
Internal auditor : Internal auditor gives suggestions to the management for the betterment of the business.
External auditor : External auditor has no need to give suggestions unless he is asked.

12. Duties :-
Internal auditor : Internal auditor primary duty is to find the frauds and errors.
External auditor : External auditor has to report about final accounts whether these are true or false.

13. Removal :-
Internal auditor : Internal auditor can removed by the management.
External auditor : External auditor can be removed by the share holders.

14. Case Of Misconduct :-
Internal auditor : Internal auditor cannot be prosecuted for professional misconduct except (C.A).
External auditor : External auditor can be prosecuted.


IMPORTANCE OF MUTUAL CO-OPERATION :-
External auditor may get much assistance from the internal auditors about the accounting system and technical knowledge of the business.
To reduce his work he may rely on the work of internal auditor. But if any error or fraud remains undetected then external auditor will he held responsible. In some cases internal auditor may also restrict his work in that section where external auditor has made detailed checking. So by mutual co-operation both the auditors may help each other and may reduce their work.
Any how external auditor can not shift his responsibilities on the internal auditor.

5 comments:

Anonymous,  10 July 2013 22:57  

Good work here

Anonymous,  6 November 2013 19:26  

Well explained

Anil choudhary,  12 December 2013 12:10  

Nice..

Tulonga David 29 April 2014 03:11  

very clear and understandable

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