December 10, 2021 by Bhawna Arora
Both statutory (independent) and internal auditors play a significant role in the audit process on a different level. There are certain distinctions in Internal and Statutory Audit mentioned below.
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BASIS OF DISTINCTION |
STATUTORY AUDIT |
INTERNAL AUDIT |
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Applicable Section and rules |
Provision of Section 139 to 147 deals with the statutory audit and auditor. |
Section 138 read with Rule 13 of The Companies (Accounts) Rules, 2014, provides the details in regards to internal audit and auditor. |
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Applicability on Companies |
Every company must appoint a statutory auditor as per Section 139 of the Companies Act 2013. |
The Appointment of Internal Auditor shall be done by every listed Company, unlisted public company, and private company fulfilling the conditions provided in Rule 13 of the Companies (Accounts) Rules. |
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Appointing authority |
The statutory auditor is appointed at Annual General Meeting by the shareholders |
An internal auditor can be appointed by the board. |
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Qualification |
As per Section 141 of the Act, only a Chartered Accountant (CA) is eligible to be appointed as an auditor. |
As per Section 138 of the Act, a CA, or Cost Accountant, or other professional as decided by the Board can act as an internal auditor. |
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Nature of Audit |
Statutory Audit is done on annual basis. |
Internal Audit is regular in nature. |
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Status |
A statutory auditor is an independent professional. |
An internal auditor may or may not be a company’s staff. |
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Removal |
The statutory auditor can be removed from his office before the expiry of his term by passing a special resolution in a general meeting. |
The internal auditor can be removed by the Board. |
Both internal and statutory audit processes help the management examine the company's overall functioning, for example, evaluating the performance of employees, timely fulfillment of statutory laws, allocation of resources, etc.