Statutory vs. Internal Audit

The audit aims to analyze the reliability of financial statements. An effective audit system is required to establish proper control, supervision, and monitoring of the company's functions. Where Internal audit focuses on the internal control structure within different departments, on the other hand, statutory audit checks the authenticity of the financial reports to help gain the trust of shareholders, lenders, and the government.

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.




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.

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.

Appointing authority

The statutory auditor is appointed at Annual General Meeting by the shareholders

An internal auditor can be appointed by the board.


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.

Nature of Audit

Statutory Audit is done on annual basis.

Internal Audit is regular in nature.


A statutory auditor is an independent professional.

An internal auditor may or may not be a company’s staff.


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. 

Related Articles