Statutory Audit vs. Internal Audit What’s the Difference?

A statutory audit, also known as an external audit, is an independent examination of a
company’s financial records, statements, and accounts. It is conducted by a qualified external
auditor who is appointed by law or regulation to ensure compliance with statutory requirements.
The purpose of a statutory audit is to provide an objective and unbiased assessment of the
company’s financial position, performance, and adherence to relevant laws and regulations.
Internal audit, on the other hand, is an independent, objective assurance and consulting
activity designed to add value and improve an organization’s operations. It is conducted by
internal auditors who are employees of the organization. The primary focus of the internal audit
is to evaluate and improve the effectiveness of risk management, control, and governance
processes within the organization.

What is the difference between a Statutory audit and an Internal audit?

In order to let you know about the major differences, here are the points that you need to know
in terms of the Statutory audit and Internal audit Dubai.

Statutory Audit:-

1. Independence: The statutory auditor is independent of the company being audited and is
   not influenced by management or any other parties. This independence ensures the
   objectivity and integrity of the audit process.
2. Compliance Verification: The auditor verifies whether the company’s financial statements
   and records comply with applicable accounting principles, regulations, and legal
   requirements. This includes assessing the accuracy, completeness, and fairness of the
   financial information presented.
3. Financial Statement Audit: A significant part of a statutory audit focuses on auditing the
   financial statements, such as the balance sheet, income statement, and cash flow
   statement. The auditor examines the underlying transactions, supporting documentation,
   and accounting practices to express an opinion on the fairness and reliability of the
   financial statements.
4. Auditor’s Report: At the conclusion of the audit, the auditor provides an auditor’s report,
   also known as an audit opinion. The report states the auditor’s findings, conclusions, and
   opinion on the financial statements’ reliability and compliance with applicable standards.
   

Internal Audit:-

1. Internal Function: Internal audit is an internal function within the organization, conducted
   by employees who are independent from the activities they audit. This independence
   ensures impartiality and enables internal auditors to provide objective evaluations and
   recommendations.
2. Risk Assessment: Internal auditors assess the organization’s risks and evaluate the
   adequacy and effectiveness of controls in place to manage those risks. They identify
   control weaknesses, potential areas of risk, and opportunities for improvement.
3. Operational Audit: Internal audit goes beyond financial statements and focuses on
   operational aspects of the organization. It examines various areas, such as internal
   controls, compliance with policies and procedures, operational efficiency, and
   effectiveness of processes.
4. Continuous Monitoring and Improvement: Internal audit is an ongoing process that
   involves regular monitoring and evaluation of the organization’s activities. Internal
   auditors provide recommendations for improving internal controls, risk management
   practices, and operational efficiency.
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