Is Internal Audit a Better Career Than Statutory Audit in India? If you do not know the answer, read this blog.
Auditing is a process of evaluating an organization’s financial statement and determining whether it is accurate and complying with regulatory guidelines. Internal audit is conducted by the organization itself, while external audit is conducted by an independent third-party.
There are many advantages to pursuing a career in internal audit over statutory audit in India.
For one, internal audit provides a more comprehensive overview of an organization’s financial statement and operations. This can be invaluable for organizations that are subject to multiple regulations or who have complex financial structures.
Additionally, internal audit offers a higher level of job security. As an internal auditor, you will be less likely to be laid off in the event of financial difficulties within the organization.
Additionally, internal audit positions often come with better benefits and salary packages than those in statutory audit.
Finally, pursuing a career in internal audit will allow you to develop a deeper understanding of the inner workings of an organization. This knowledge can be invaluable in advising senior management on strategic decisions and ensuring compliance with corporate governance requirements.
What Are the Functions of an Internal Audit?
Internal audit has many roles, one of which is to verify the existence of assets and recommend proper safeguards for their protection. This department executes an approved audit plan and performs the following tasks;
- Evaluate the validation of the system of internal controls
- Recommend alternatives and improvement in controls
- Assess compliance with federal laws and contract obligations
- Review programs to clarify that results are consistent with the established objectives
- Investigate the occurrence of theft, waste, and funds mismanagements.
- Comparison of objectives and real performance standards.
- Analyzing risks and protecting company assets among other functions.
Why Are Internal Audits Important?
According to the law, an Internal Audit applicability is important as it provides reliability to a set of financial statements and gives the stakeholders confidence that the accounts are true and safe. Every company is exposed to a certain risk over the course of its life, and what differentiates a company from its competitors is how they deal with the potential threats. Here are some of the ways an internal audit is important in dealing with these threats;
- It helps review the rules and procedures so as to ensure that the activities of the business or company are in line with the regulations
- It keeps control over all the operations of an organization, therefore, protecting the assets.
- Helps to identify gaps in the company that can be revisited to save your assets
- With an internal audit, you are aware of all the business transactions and this reduces the risk of potential fraud and scandals.
Internal Audit as a Career
Qualified internal auditors have always been sought after. The demand for internal auditors is on the rise, as compliance laws demand the maintenance of internal audit functions. This clearly states, if you want a long-time career then an internal audit can be a good option for you.
What Is a Statutory Audit?
A statutory audit is a legally required review of a business or government’s financial records. In this, the role of the auditor is to report whether the financial statements issued by an organization are true and fair.
A statutory auditor is a term used to refer to a person with an auditing role.
What Are the Functions of Statutory Audit?
A statutory audit is not as some would assume, a search for a proverbial needle in a haystack, but a statutory audit is conducted to comply with set statutes and test financial statements for compliance with the set standards. This process also ensures that the organization’s financial statements are in accordance with the company’s financial performance and position.
What is the Importance of Statutory Audit?
The statutory audit is important as it provides a true and fair assessment of a company’s financial statement which helps to retain the confidence of shareholders. this helps in improving the business’s internal controls and systems. Here are some of the other reasons why statutory auditing is important;
- It increases the authenticity of the financial reports as the auditor properly verifies the statements.
- It helps improve management to perform their job efficiently.
- Improves the reputation of the company because the reports are free from errors misrepresentation and inaccuracies.
- Just like internal audits, it also minimizes the risk of fraud.
- It helps to gain the trust of banks and shareholders
- An internal auditor is able to show you where the internal control is weak and where there is more risk
Even though audit might not apply to small companies if they get audited themselves their systems will be strong and easily obtain bank loans and other facilities.
Is Internal Audit a Better Career than Statutory Audit in India?
Now in India, it all depends on what you want to do and where you want to work. In a big firm or any highly reputed firm who works with a strict methodology, both are good viable careers. If you want knowledge of the law, the regulations, and the of country’s government then a statutory audit is the best. You are basically doing a risky job! In case of a bad job then your career is at stake.
Internal audit is very detail-oriented though, you find problems with the company’s Accounting System Online and controls and you are the one to provide the entity with solutions. This field is very detailed in terms of processes and controls and you don’t have to adhere to changing regulations unless the firm requires you to.
What Are the Differences Between Internal Audit & Statutory Audit?
When it comes to the two types of audits at some point their functionalities may be the same but realistically there are some rules that make them different. Below are some of the differences between the two;
- A statutory audit is done annually to form an opinion on the financial statement of the company whereas an internal audit is done basically to prevent and detect errors and frauds.
- Statutory auditors are appointed by the shareholders of the company while internal auditors are appointed by the management of the company.
- Statutory audit is done by the practicing-chartered accountants having operations outside the company while internal audit can be done by the employee of the company.
- The internal auditor needs to give suggestions to improve weaknesses but no need to present the report while a statutory auditor requires to prepare a report after the completion of work
- Internal audit is the act of checking books, accounts, and other activities of an organization while statutory audit deals with evidential documents where book keeping is highly crucial here
- The remuneration of a statutory auditor is fixed by the shareholders while the remuneration of an internal auditor is fixed by the management.
- The statutory audit requires the auditor to be a CA holder while internal audit does as requires specific qualification as per provision of law
There are many reasons to choose a career in internal audit over statutory audit in India. Internal audit offers more job security, better pay, and more opportunities for advancement. Additionally, internal audit provides a more holistic view of an organization, while statutory audit focuses narrowly on financial reporting. Finally, internal audit is a more strategic function within an organization, while statutory audit is primarily compliance-based. For any help related to this, get in touch with Vakilsearch.