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The Relationship Between the Statutory Audit and Internal Auditors

When it comes to auditing, both the statutory audit and the internal audit are important processes. But what is the relationship between these two forms of auditing? Can the statutory audit rely on the work of internal auditors? Let’s take a look at how these two types of audits interact and what impact each has on each other.

What is a Statutory Audit?
A statutory audit is conducted by an independent external auditor who reviews a company’s financial statements to ensure they are accurate and comply with applicable laws and regulations. This type of audit must be carried out by an auditor registered with the relevant accounting or professional body in the country in which it is being conducted.

What is an Internal Audit?
An internal audit, on the other hand, is conducted by an employee within a company who focuses on assessing risk management practices, evaluating business efficiency, examining compliance with established policies and procedures, detecting fraud or embezzlement, and reviewing operations related to finance or accounting. It can also be used to assess whether certain activities have been completed correctly or not.

Can the Statutory Audit Rely on Internal Audits?
The simple answer is yes; however, there are some caveats that should be taken into account when considering this question. Firstly, it’s important to understand that while internal audits can provide valuable insights for a statutory audit team, their findings must always be independently verified by a qualified external auditor before any reliance can be placed upon them. Furthermore, any areas identified as needing further investigation should be done so in accordance with accepted standards for external audit work. Finally, it’s important to note that even if all areas identified as needing further investigation have been addressed satisfactorily by an internal auditor, some degree of independent assurance may still need to be provided in order for a statutory audit team to place full reliance upon their work.

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In conclusion, while it is possible for a statutory audit team to rely on the work of internal auditors in certain situations, such reliance should only ever occur after independent verification has been undertaken by an experienced external auditor. Moreover, any areas identified as needing further investigation should be done so in accordance with accepted standards for external audit work before any reliance can be placed upon them. With these considerations taken into account, both statutory and internal audits can work together to ensure that all financial statements are accurate and compliant with applicable laws and regulations.

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