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A statutory auditor conducts an audit required by applicable law or regulation and gives an independent opinion on specified financial statements. An internal auditor evaluates risks, controls and activities for the organization’s management and board, and may recommend improvements. Their work can overlap, but their mandates, independence safeguards, audiences and outputs are different. The precise statutory rules depend on the jurisdiction and entity.
What is the difference between a statutory auditor and an internal auditor?
| Area | Statutory auditor | Internal auditor |
|---|---|---|
| Mandate | An audit required by applicable law or regulation for an entity or set of financial statements. Requirements vary by jurisdiction. | An organizational assurance function shaped by its charter, professional standards, risk assessment and governance arrangements. |
| Main purpose | Gather sufficient appropriate evidence to support an opinion on financial statements. | Analyze and evaluate organizational activities, providing assurance, recommendations and information to management and the board. |
| Independence | Must be independent of the audited entity under applicable legal and professional requirements. | Must maintain objectivity and organizational independence, with safeguards such as functional board reporting and protection from interference. |
| Typical coverage | Financial statements covered by the statutory audit mandate. | May cover financial reporting, operations, compliance, asset safeguarding, governance and ethical culture. |
| Reporting and output | A formal auditor’s report and opinion, with other reporting duties where applicable. | Findings, evaluations, assurance and recommendations communicated to management and the board or equivalent authority. |
These roles may examine the same financial-reporting controls, but they do so for different purposes. A statutory auditor considers evidence relevant to the financial-statement opinion; internal audit may assess whether controls are suitably designed and working as part of a broader review of organizational risk.
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What does a statutory auditor do?
A statutory audit exists because a law or regulation requires it for a particular entity or set of accounts. The auditor’s central task is to obtain evidence that supports an independent opinion on the financial statements—not to provide a general assessment of every part of the organization. The Public Company Accounting Oversight Board describes the financial-statement auditor’s responsibility in those terms in AS 2605.
The exact meaning of “statutory auditor” depends on local law. Rules can differ on which entities must be audited, who may be appointed, how appointment works, the scope and term of the engagement, and to whom the auditor must report. The European Union’s Directive 2006/43/EC consolidated text dated March 18, 2026 is one specific legal framework; it should not be treated as a worldwide definition.
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What does an internal auditor do?
Internal audit is an assurance and advisory function for the organization. Its work may address the reliability of reporting, operations, compliance, safeguarding of assets, governance and ethical culture. Its scope is informed by the function’s charter, risk assessment, professional standards and governance arrangements, rather than being limited to the financial statements.
The PCAOB’s AS 2605, section .03, describes internal auditors as providing “analyses, evaluations, assurances, recommendations, and other information” to management and the board of directors, or to others with equivalent authority and responsibility. The function can be staffed by employees or provided by an external service provider; what matters is the role and the safeguards around its work.
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How do their independence requirements differ?
Statutory auditor: independence from the audited entity
For a statutory audit in the European Union, Directive 2006/43/EC requires the auditor or audit firm to be independent of the audited entity and not involved in its decision-making. It also requires reasonable steps to prevent conflicts of interest and relevant relationships from compromising independence. These are EU requirements; other jurisdictions have their own rules.
Internal auditor: organizational independence and individual objectivity
Internal auditors are part of, or engaged by, the organization they assess. That does not mean independence is irrelevant. The Institute of Internal Auditors’ Attribute Standards call for organizational independence of the internal audit activity and objectivity in individual work. Functional reporting to the board, direct interaction with it, and freedom from interference in setting scope, performing work and communicating results are safeguards. Administrative reporting within management can coexist with that functional relationship.
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The IIA’s Internal Audit Assessment Tool for Audit Committees puts the distinction this way: “The external auditors are independent of the organization. By contrast, the internal auditors, who are integral to their organization, demonstrate organizational independence and objectivity in their work approach and are independent of the activity they audit.” The statement describes the IIA’s guidance, not a universal legal definition.
The IIA’s Code of Ethics also directs auditors to avoid activities or relationships that may impair—or appear to impair—their unbiased assessment. For example, an internal auditor should not assess an activity in a way that compromises objectivity because of a personal or professional conflict.
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Who do they report to, and what do they deliver?
Internal audit reporting
The chief audit executive should have a functional reporting relationship with the board and direct interaction with it. Under the IIA’s Attribute Standards, board involvement includes matters such as the internal audit charter, risk-based plan, budget and resources, communications, and the chief audit executive’s appointment and remuneration. This positioning helps protect the function’s ability to raise findings, including when they concern management.
Statutory audit reporting
The statutory auditor issues a formal report and opinion on the financial statements. Additional recipients and communications depend on applicable law, standards and entity type. For example, the EU directive’s audit-committee reporting provision addresses key matters arising from a statutory audit, particularly material weaknesses in internal control related to financial reporting, for public-interest entities. The provision surfaced in the Directive 2006/43/EC consolidated text dated July 19, 2013; its application and current wording should be checked against national implementation and the entity’s category.
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Can the two auditors examine the same controls?
Yes. Both may examine financial-reporting controls, for instance, but overlap does not make their responsibilities interchangeable. The statutory auditor uses relevant evidence to support the financial-statement opinion. Internal audit can examine those controls as part of a broader risk-based plan, assess whether they work as intended, and report recommendations to the organization.
Coordination may help reduce unnecessary duplication and improve the use of assurance work, but it does not transfer either function’s mandate. The statutory auditor remains responsible for the statutory audit opinion; internal audit remains accountable for its own work and reporting arrangements.
Are internal auditors appointed by the audit committee?
There is no single answer that applies to every organization. Appointment and approval arrangements depend on the jurisdiction and governance structure. IIA standards support board oversight of the chief audit executive’s appointment and remuneration, but that does not establish that every audit committee directly appoints every internal auditor.
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