Internal Audit vs External Audit
An audit is a formal process of evaluation of an organization mainly from the point of view of its financial performance. However, an audit may encompass evaluation of anything from personnel to systems to processes involved in an organization. There are even energy audits, project management audits and quality audits that help in overall efficiency and productivity of an organization. Basically, audits are classified as internal audits and external audits. There are similarities in objectives of both types of audits though there are differences also that ill be highlighted in this article.
The most notable difference between internal and external audit is the fact that while internal audit is conducted by a separate departments that still is inside an organization, external audit is conducted by an independent body that resides outside the organization that it audits. Internal audit is more or less a routine procedure that can be initiated anytime on the orders of the management of the organization and covers specific areas or departments that are requested by the management. Internal audits can be both financial as well as non financial and are performed by auditors that are employees of the company though they report directly to the management. Internal audits try to find out the risks faced by a company and the steps being taken to manage these risks.
External audits are requested by a company and are undertaken by public accounting firms. These are exercises that are performed in the most professional manner and are seen as significant from the point of view of all stakeholders in a company. These audits bring to light the financial condition of a company in a most unbiased manner and reflect a fair assessment of the financial standing of a company.
A major point of difference between these two audit types is the fact that while internal audits are more concerned with risk management, external audits remain confined to final accounts of a company and if data has been presented in a fair and transparent manner in the financial statements or not.
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In brief: Internal Audit vs External Audit • Internal audits are exercises conducted by employees of a company while external audits are performed by external agencies that are not employees of the company. • Internal audits can be quite broad and cover any area of operation. They are initiated anytime that management deems fit. On the other hand, external audits are mainly concerned with evaluating the financial condition of a company from the point of view of all stakeholders. • Internal audits play an important role in preparing a company for a fair assessment through external audits.
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