Therefore,Internal Auditors do not need to possess specific qualifications as laid downin the Company Act, but Statutory Auditors must have those qualifications. An audit trail is a record of all transactions and activities that have been performed in an information system. An audit trail is a comprehensive record of all transactions and activities within an information system. It serves to track changes, identify errors, and maintain the integrity of the system.

Registered charities with total operating expenditure of less than $550,000 are not required by law to have an audit or review. However, you may be required by your rules (e.g. trust deed, constitution, or charter) or as a condition of receiving a grant to have your financial statements audited or reviewed. These charities may choose who performs the audit; it does not need to be a qualified auditor unless stated in your rules. However, in somecases, they can be appointed by the company directors or the government. Furthermore,it is mandatory to appoint a statutory auditor as stipulated by the CompaniesAct, but the appointment of Internal Auditors is non-compulsory.

• Smaller organizations may prioritize internal audits if statutory audits are not mandated, although many adopt both to ensure robust oversight.
• As with many professional services firms, Grant Thornton’s  typical clients are corporations and businesses, not individual consumers, making platforms like Trustpilot not really relevant.
• Statutory audits are compulsory for certain companies and organizations based on local laws, corporate structure, or revenue thresholds.

Internal audits can encompass a broad range of areas, including operational efficiency, compliance with internal policies, and the accuracy of financial reporting. The Statutory Audit provides assurance to the shareholders and other stakeholders of the listed company that the financial statements are prepared in accordance with applicable laws, regulations, and accounting standards. It also helps to identify weaknesses in the company’s internal controls and accounting practices, which can lead to improvements in the company’s operations and financial reporting. An internal audit is conducted by an internal auditor who is appointed by the company’s management, while the statutory audit is conducted by an external auditor who is appointed by the company’s shareholders.

Key Differences between Statutory Audit and Internal Audit

Accounting and taxation services encompass essential business functions focused on recording financial transactions, preparing accurate financial statements, and ensuring compliance… After the audit is complete, the auditor prepares a report intended for stakeholders such as shareholders, investors, and lenders. The auditor’s opinion is included in the organization’s annual report, which is made publicly available, enhancing transparency and accountability. In Hong Kong, all companies incorporated under the Companies Ordinance are required to maintain proper books of accounts and prepare audited financial statements annually. SW Hong Kong is a recommended audit firm for companies with operations in the Asia-Pacific region and in specific industries, such as education and pharmaceuticals. It’s particularly suitable for businesses looking for a Hong Kong-based firm with deep local knowledge and strong regional connectivity.

Statutory audits are compulsory for certain companies and organizations based on local laws, corporate structure, or revenue thresholds. The primary focus is on financial accuracy and regulatory compliance to maintain stakeholder trust. The frequency of audits varies based on organizational needs and regulatory requirements. Internal audits may be conducted regularly—quarterly, semi-annually, or annually—while statutory audits are usually performed on an annual basis. A management letter is a report issued by an auditor to management, detailing findings and offering recommendations for enhancing internal controls and operational efficiency.

While both serve critical functions, they differ in purpose, scope, and regulatory requirements. Understanding these differences helps businesses optimize their auditing processes effectively. In an internal audit, the auditor may examine the organization’s processes, controls, and systems in detail to identify areas of improvement.

Statutory audits make sure that legal requirements and regulatory standards are followed by evaluating financial and compliance risks. Accountability and ReportingInternal audit reports are usually given to the organization’s management, emphasising methods for risk mitigation and operational enhancements. Statutory audit reports, on the other hand, prioritise financial correctness and compliance and are delivered to shareholders, regulatory agencies, and other stakeholders. ObjectivesInternal audits’ main goals are to evaluate and strengthen internal procedures, pinpoint areas for development, and boost operational efficacy.

They may also review the company’s inventory management process to ensure that inventory levels are accurately reported and that there are adequate controls in place to prevent theft or loss. Deloitte Touche Tohmatsu (Deloitte) is an international accounting and professional services network headquartered in the UK. Statutory Auditors must prepare reports after the completion of workdetailing the facts found during the audit and present it to the appointingauthority, particularly shareholders. On the other hand, internal auditors donot have to submit any report to the shareholders, but they give suggestions toimprove identified weaknesses. Evaluation of RiskInternal audits emphasise risk protection and mitigation across a range of corporate functions, with a focus on analysing risks to meet organisational objectives.

Is a statutory audit require by law?

Internal auditors are appointed by the company’s management, while statutory auditors are appointed by the shareholders. Despite their differences, both internal and statutory audits bring substantial value to organizations, supporting overall business integrity and stakeholder trust. This type of audit is conducted by independent external auditors and is designed to protect stakeholders’ interests, difference between statutory audit and internal audit including those of shareholders, creditors, and regulatory authorities. Statutory Auditor form an opinion on whether the company’s financial statements offer an true and fair view is the primary goal of a statutory audit.

Bookkeeping vs Accounting

In contrast, Statutory Audit is an external, legally required review of financial statements, ensuring compliance and accuracy. Both are essential for effective governance, with Internal Audit being proactive and Statutory Audit providing independent assurance. On the other hand, a statutory audit is legally mandated for certain types of businesses and is conducted by independent external auditors. Its main objective is to provide an unbiased opinion on the accuracy and fairness of a company’s financial statements. Statutory audits help stakeholders, including shareholders, regulators, and the public, gain confidence in the financial health and transparency of the organization.

• Internal audit activities are conducted on an ongoing basis, often following a risk-based approach.
• Statutory audits are legally required examinations of a company’s financial statements, conducted by independent, qualified auditors.
• For public companies and large enterprises, statutory audits are a regulatory requirement, while internal audits are a best practice for effective risk management.
• Another key difference between internal audit and statutory audit is the level of independence of the auditor.

In Hong Kong, the firm has built a strong reputation for delivering high-quality audit services supported by deep industry knowledge and a commitment to regulatory compliance. EY is best suited for large or fast-growing companies, especially those in regulated sectors like finance or technology. Their audits carry significant weight with both regulators and investors, which can make a real difference if you’re raising capital in addition to meeting regulatory requirements.

What qualifications are required for internal and statutory auditors?

An internal audit is a continuous, objective assessment conducted by an organization’s audit team or third-party consultants appointed by the organization. The primary purpose of internal auditing is to evaluate and improve the effectiveness of the organization’s governance, risk management, and control processes. An internal audit is a process conducted within an organization to evaluate its operations, internal controls, risk management, and governance processes.

Legal & Policies

While both internal audit vs statutory audit involve the examination of a company’s financial records, they serve different purposes, have different scopes, and are conducted by different parties. Internal audits serve as an ongoing internal control mechanism, providing management with insights into the effectiveness of operational processes, risk management, and internal controls. They are conducted by internal staff or independent professionals hired by the company.

Internal audits are proactive; they aim to identify potential issues before they evolve into larger problems. They’re instrumental in aiding management to establish and maintain an effective control environment, promote transparency, and manage risks effectively. If your business doesn’t need a full audit but requires support with accurate record-keeping or preparing financial statements, Statrys offers accounting solutions designed specifically for SMEs in Hong Kong and Singapore. These audited statements, along with an auditor’s report, must be submitted when filing the company’s Profits Tax Return (PTR) to the Inland Revenue Department (IRD). Audited financial documents are also especially important as supporting documents if you are filing an offshore tax claim to be exempted from profits tax in Hong Kong. Lastly, ShineWing (SW) CPA Limited is a prominent accounting and advisory firm with a strong presence in Hong Kong.

IntroductionAudits are methodical reviews of records, papers, and procedures with the goal of confirming their correctness, comprehensiveness, and conformity with rules. The two main kinds of audits that organisations perform are statutory audits and internal audits. In conclusion, businesses benefit from a dual approach to financial oversight through both statutory and internal audits. Understanding the distinctions and leveraging the strengths of each type of audit ensures comprehensive financial governance.

An internal audit can be carried out by the company’s internal team or by contracting an outside consultant to carry out the review procedure. Its goal is to make sure that the organization’s governance, risk management, and internal controls are operating efficiently. Management can increase operational efficiencies and pinpoint areas for improvement with the help of internal audits. Since your company has to keep detailed records ofpast and present financial transactions for future reference, it is the duty ofvarious accountants verified for statutory audit and internal audit to preparesuch financial statements.

Audit Requirements in Hong Kong

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. Audits play a crucial role in maintaining transparency, ensuring compliance, and improving the financial and operational integrity of organizations. Among the various types of audits, internal audits and statutory audits are two of the most prominent.