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.