Relationship between internal auditor and statutory auditor.
The relationship of the internal auditor and statutory auditor can be summed up as follows: -
1. As per manufacturing and other companies order 1988 issued under section 227 of the companies’ act the statutory auditor has to comment upon the effectiveness and suitability of internal audit system laid down be the management.
2. To discharge this responsibility: statutory auditor should evaluate the internal audit system he should evaluate the strength of the internal audit staff, their qualification and experience.
3. Evaluation of the actual work of internal auditor – After studying the internal audit system and structure actual work of the internal auditor should also be evaluated. Statutory auditor has to make use of the work of internal auditor. This he can do only when he himself puts faith in the work of internal auditor.
4. Relying on the work of internal auditor – statutory auditor has to decide that up to what extant he can rely upon the work of the internal auditor. This will decide the extent of his own checking. If he feels that internal auditor has properly done his work he can reduce the extent of his checking.
5. No reduction in responsibility – Relying on work of internal auditor in no way reduces the responsible for the discharge of his duties as statutory auditor.
Relying on the internal auditor can only reduce the burden of the statutory auditor.
For all his works statutory auditor would remain responsible.