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CMA Intermediate · Corporate Accounting and Auditing · Nature, Scope, Objectives and Significance of Auditing

Which feature best distinguishes an internal audit from a statutory audit of a company?

The key difference is that internal audit is conducted for management, with its scope set by management or the audit committee. Statutory audit is the one that gives members an opinion on true and fair view. Internal audit is also mandatory only for prescribed classes of companies, not every company.

  1. AInternal audit is conducted for management and its scope is decided by management or the audit committeeCorrect
  2. BInternal audit is always performed by an independent outsider appointed by shareholders
  3. CInternal audit expresses an opinion on true and fair view of financial statements to members
  4. DInternal audit is compulsory for every company irrespective of size

Explanation

Internal audit is an management tool; its scope, reporting and frequency are set by management or the audit committee, and it may be done by employees or an outside firm. Statutory audit alone results in an opinion to members on true and fair view. Internal audit under the Act is mandatory only for prescribed classes of companies, so the last option is wrong.

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