INTERNAL AUDIT STATUS VIS-A-VIS STATUTORY AUDIT :

Relationship between internal auditor and statutory auditor.

Statutory Auditor and Internal Auditor both are independent entity. A statutory Auditor of a company cannot be the internal auditor of the same company. In certain cases, statutory auditor refers the report of internal auditor and he expresses his opinion based on the report of internal auditor. Similarly in certain cases, internal auditor also refers the report of statutory auditors. The relationship between statutory auditor and internal auditor may be summed up as given below:

1. Comment on the Internal Audit System in place: the statutory auditor has to comment upon the effectiveness and suitability of internal audit system laid down by the management. 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.

2. 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.

3. 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 checking by statutory auditor. If he feels that internal auditor has properly done his work he can reduce the extent of his checking.

4. 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.