Scope (or) Functions of Internal Auditor
1. Evaluating of Accounting and Administrative
Control: Internal auditing
ensures effective and efficient system of accounting control,
standard costing, budgetary control and all other administrative controls.
2. Protection of Assets: Internal auditing besides ensuring proper accounting and
custody of companies asset’s it is concerned with the protection of the assets.
It reports to the management about the utilization of the asset and the adequacy
of return from the investment.
3. Compliance with Established Policies and
Procedures: Internal auditing is
concerned with reporting to the management about the compliance of the
predetermined policies, procedures and standards of performance.
4. Reliability and Validity of Reports: Internal
auditing ascertains the reliability of financial and operating reports prepared
throughout the enterprise. It also provides assurance to the management of the
validity of the reports and records. Internal auditing brings to light the
inadequacies in the check and control system in operation to the management.
Further, it provides advisory services to the management for the improvement of
the system.
Audit
conducted internally i.e., by the management to ensure that the company
complies with the policies, procedures and principles.
The
person who conducts internal audit is called as Internal Auditor, who is
appointed by the management. The scope of work, powers and duties of internal
auditor are determined by the management.
Internal
Auditor need not be a qualified Chartered Accountant and is remunerated in the
form of salary as he is an employee of the company.
Internal
auditor has to submit an Internal Audit report to the management.
Audit
conducted externally i.e., by the shareholders to examine the accuracy of the
books of accounts, records and financial statements.
The
person who conducts external audit is called as Statutory or External Auditor
who is appointed by the shareholders of the company. The scope of work, powers
and duties of statutory auditor are determined by the Companies Act.
Statutory
Auditor should be a qualified Chartered Accountant and is remunerated in the
form of audit fees as he is an independent person.
Statutory
auditor submits Statutory Audit report to the shareholders of the company.
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