Auditing procedures for both internal auditors and external auditors have undergone a sea change owing to the globalization of business, progression in technology. Hence the requirement for value-added audits has become very important figures in any corporation.
Here is an understanding of “Internal Audit” “External Audit” – In simple terms external audit is the assessment of the financial statements of a company / firm, government institution, individual or any other legal organization.
Role of External Auditor-
- External Auditors primarily review financial statements and compilation, do not pass judgment on the organizations financial statements.
- Financial systems may be taken into consideration by the external auditor as a method to confirm all the figures in the accounts of the organization and complete the entire audit process.
- The final accounts are the prime fixation of the external auditor who is responsible for verifying the authenticity of the data presented in the financial accounts of the organization. External auditors can be independent public or government auditors whose prime objective is to adhere to government regulations and award terms.
- External auditors understand that both central and state governments fund a considerable portion of the organizations activities and they go all out to ensure the money is spend as intended.
On the other hand, internal auditing is an autonomous, objective assurance and advising activity which is planned to add value and advance an organizations functioning.
Role of Internal Auditor-
- The internal auditor’s prime duty is evaluating an organizations risk management policy and practices, management of control frameworks and administrative processes.
- The internal auditor also covers financial systems of the organization as part of the audit plan.
- The general risk management measures of an organization are a major concern for the internal auditors for assessing the achievement of the organizational objectives.
Distinction Between External And Internal Auditors-
- Profile Within The Organization-
The internal auditors’ are an integral element of the organization and their working principles are governed by professional standards, the board, management with the major client being the management / board.
On the other hand, external auditors are not part of the organization and their working principles are set mainly by statute with their primary client being the board of directors.
- Target-
It is to be noted that the internal auditor’s have a comprehensive scope of activity by assisting an organization to achieve its objectives, advance operations, risk management, internal controls and administration processes. Internal auditors are focused on all aspects of the organization – financial and non-financial, with prime concern about future events.
The major target of external auditors is to offer autonomous opinion on the organization’s fiscal statements, on a yearly basis.
- Autonomy-
The Internal auditor should be independent from the auditing activities whereas the external audit is independent from its clients, which is the organization.
- Responsibility Towards Internal Control-
The Internal audit is concerned with the entire phase pertaining to the organizations internal control system. The external audit concentrates on the internal control system only from the peripheral which allows them to eradicate errors that aren’t significant, as they do not have impact over the financial outcomes.
Similarity Between External And Internal Auditors-
- It is to be noted that both internal audit and external audit career are governed by international standards which denotes the professional standards and the ethical code.
- The internal auditor and the external auditors are focused on the overall procedures of the organization.
- Risk is a very vital constituent taken into consideration by both internal and external auditors.
- Professional discipline / professional standards rule the activity of both.
- The internal auditor and the external auditors look for active collaboration between the two functions.
- The sovereignty of the auditor is very important for both the internal auditor and the external auditors.
- The internal auditor and the external auditors are profoundly occupied in information systems as it forms the main element of administrative control and is a fundamental to the financial reporting procedure.
- The internal auditor and the external auditors generate formal audit reports on their activities.
The above stated points provide a clear understanding of “Internal Audit” “External Audit”, the roles of external internal auditors and the distinction between both the jobs.
