How does a tax audit differ from a statutory audit?

Tax Audit:

Conducted by tax authorities, such as the Internal Revenue Service (IRS) in the United States or Her Majesty’s Revenue and Customs (HMRC) in the UK.
Aimed at verifying the accuracy of tax returns filed by individuals or businesses to ensure compliance with tax laws and regulations.
Focuses on assessing whether the reported income, deductions, credits, and other tax-related items are correct and supported by appropriate documentation.
Typically triggered by red flags in tax returns, random selection, or specific industry-related factors.
Penalties may be imposed for errors or discrepancies found during the audit.

Statutory Audit:

Conducted by independent accounting firms or auditors appointed by the shareholders or regulatory authorities.
Mandated by law or statute for certain entities, such as public companies, to ensure transparency, accuracy, and reliability of financial statements.
Focuses on examining the financial records, transactions, and statements of an organization to provide an opinion on whether they present a true and fair view of its financial position and performance.
Aims to enhance investor confidence, protect stakeholders’ interests, and detect financial irregularities or fraud.
Compliance with accounting standards and regulatory requirements, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), is essential.
The audit report is submitted to relevant regulatory bodies, shareholders, and other stakeholders.