In every company, auditing is a must to make sure that all the operations are going smoothly. There are several types of auditing services which we covered right here. But today, we’re gonna tackle an interesting topic. We’re gonna settle the internal audit vs statutory audit debate. What are the differences between these two? And when do you need each of them for your company? We’ll cover that and more if you keep on reading!
Internal Audit vs Statutory Audit - Breaking It Down!
Auditing, in its essence regardless of the type, is a must to ensure that all kinds of operations are running correctly in a company. However, sometimes there are grey lines where the difference between different types of audits blurs. And two of the key types are internal and statutory audits. So, first things first, let’s talk about the differences!
What Are Their Objectives?
First off, there’s a slight difference when it comes to why companies need either of these audits. Internal audits, as the name suggests, happen to improve the company’s performance and add value to it. In other words, it’s there as a self-assessment. Meanwhile, a statutory audit provides an objective view to outside lookers on how truthful and fair the financial statements of a company are. So basically, internal audits are like consultations, while statutory audits are for verification.
Who Conducts These Audits?
When we talk about internal audit vs statutory audit, we should always keep in mind who will actually do it. An internal audit will obviously be done by internal staff that the company delegates. But the company can, in fact, outsource that task if it wants to. Of course, management appoints these auditors in this case. Meanwhile, independent auditors should always conduct the statutory audit. And here, shareholders that are looking from the outside are the ones who appoint the auditors.
How Frequent Are They?
Internal audits can be as frequent as the management decides, or simply constantly on-going. So they could be monthly, quarterly, etc… Meanwhile statutory audits usually happen on a yearly basis. Of course, this coincides with the end of the fiscal year because the finances are important here. Speaking of which, we previously talked about the steps of the accounting cycle and how it all works!
What Is Their Main Focus Area & Who Should See Those Reports?
Again, when we talk internal audit vs statutory audit, there’s a key difference in the focal point. You see, internal audits focus on the on-going processes, risk management, and operations generally. So here, it’s natural that the interested party will be upper management. Meanwhile, statutory audits are more on the financial side of things making sure that everything is correct. And this is the territory of shareholders and potential investors!
Want Someone Else to Handle Your Audits? We Got You!
Auditing is a pretty demanding task, and we get it if you don’t feel particularly excited about it. So, why not let someone else take the load off your shoulders? Luckily for you, Noraal offers the best auditing services and much more to get your company’s finances in order. So, check out what we have to offer, and you won’t look back again!