Distinguish statutoryl from external audit.

Distinguishing Statutory Audit from External Audit

Statutory Audit:
Statutory audit refers to the mandatory examination of an organization's financial statements and accounts as required by law or statute. The primary purpose is to ensure the accuracy and fairness of financial reporting to external stakeholders, including shareholders, regulatory bodies, and the government. The statutory audit is typically conducted by external auditors, but they are appointed by the shareholders or relevant regulatory authorities. The scope of a statutory audit extends beyond financial accuracy; it also assesses compliance with legal and regulatory requirements. The auditor issues an opinion on whether the financial statements present a true and fair view and if the entity has followed applicable accounting standards.

External Audit:
External audit is a broader term that encompasses various types of audits conducted by independent auditors external to the organization. While statutory audit is a specific subset of external audit, external audit can also include non-statutory or voluntary audits commissioned by the organization for specific purposes. These purposes may include performance audits, operational audits, or audits focused on specific aspects of the business. Unlike statutory audits, external audits beyond statutory requirements are initiated at the discretion of the organization's management or board of directors to gain insights into operational efficiency, internal controls, or adherence to best practices.

In summary, while statutory audit is a legally mandated external audit primarily focused on financial reporting compliance, external audit is a broader term encompassing a range of audits, including statutory and non-statutory audits, that provide independent assessments of various aspects of an organization's operations.