1.

DIFFERENCE BETWEEN INTERNAL & STATUTORY AUDIT Internal Audit Statutory Audit 1)Appointment: The management of the organization makes the The statutory auditor is appointed by different appointment of an internal auditor. authorities. First statutory auditors are appointed by the shareholders in the annual general meeting. 2)Qualification There are no fixed qualification for the position of Qualifications of the statutory auditor are prescribed an internal auditor in the companies act, 1956. Essentially a person should be a practicing chartered accountant to be appointed as a statutory auditor. 3)Object The main object of the internal audit is to detect The main object of the statutory audit is to form an and prevent the errors and frauds. opinion on the financial statement of the organization auditor has to state that whether the financial statements are showing the true and fair view of the affairs of the organization or not 4) Scope: The scope of the internal audit is fixed by the The scope of the statutory audit is fixed by the mutual consent of the auditor and the management companys act 1956. it cannot be changed by of the unit under audit. mutual consent between the auditor and the management of the audited business unit

5) Remuneration: In case of internal auditor the management who Remuneration of the statutory auditor is fixed by appoints him fixes his Remuneration. the appointing authority, i.e. in case of first auditors, the auditors the directors fix the Remuneration in case of the subsequent auditors the company in its general meeting fixes the remuneration. 6) Report: The internal auditor submits his report to the The statutory auditor submits his report to the management of the company who is also his shareholder of the company in its general meeting. appointing authority. 7) Removal: The procedure of removal of the statutory auditor is The management of the entity can remove internal very complex. Only the company in the general audit meeting can remove the auditor. It also has to take the permission of the central government

8) Test check: He cannot rely on test check 9) Responsibility: He is responsible to the management

He can rely on test check

He is responsible to the share holder or government

2. Due Diligence Due Diligence is the effort made by an ordinarily prudent or reasonable party to avoid harm to another party or himself. The term Diligence is used for a number of concepts involving either the performance of an investigation of a business or person. In finance, due diligence is the process of research and analysis that takes place in advance of an acquisition investment business partnership. In banking industry, it refers to the responsibility of bank directors and officers to act in a prudent manner in evaluation credit application. In the securities market it refers to the responsibility of underwriters to explain the details of new securities to interested purchasers. Due Diligence is undertaken in order to determine the value of the subject of the due diligence and unearth any issues or potential issues. It is expected to provide a realistic of how the business is performing now, and how it is likely to perform in the future. Due diligence is the responsibility, one has to investigate and identify issues, due care is doing something about the findings from due diligence. Due diligence is a broader term than the financial audit. The Due diligence exercise goes beyond the books of accounts. Due diligence is necessary to allow the investigating party to find out everything that he needs to know about the subject of the due diligence. The main objective is to allow the investigators to consider his options in light of the facts. The Due diligence can be classified into many categories such as: Commercial due diligence: It is generally performed by the purchaser and involves an evaluation of commercial, strategic or operational perspective. Financial due diligence: It is performed on the books of account and other information directly pertaining to the financial matters of the firm. Tax due diligence: It is checked whether the company is regularly paying the government dues or not. Information system due diligence: Here the accountant has to look into the management information system so that the requisite information is readily available.

 Legal due diligence: Here the accountant should ensure that all the applicable legal requirements such as that of the Companies Act, Income Tax Act, or any other laws have been followed Environmental due diligence: The business has to be operated under the influence of the economical, political, legal and social environment. Personnel due diligence: The management has to work with the people, by the people and through the people.