Internal Audit VS External Audit

Internal Audit
As defined by the Institute of Internal Auditors (IIA), "Internal auditing is an independent, objective and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance.

Internal Auditors Roles include monitoring, assessment and risk analysis and controls the organization, and review and confirm the information and compliance with policies, procedures and laws. Working in partnership with management, internal auditors to the Board, the audit committee and executive management assurance that risks are mitigated and that the corporate governance of the organization is strong and effective. And when there is room for improvement, internal auditors make recommendations for improving the processes, policies and procedures. "


External Audit


An external auditor is an audit professional who performs an audit according to specific laws or regulations on the financial statements of a company, government entity, legal person or organization that is independent of the audited entity. Information users of these financial institutions, such as investors, government agencies and the general public, are based on the external auditor to audit report impartially and independently.
The manner of appointment, qualifications and format of reports by an outside auditor is defined by law, which varies according to the jurisdiction of different countries. External auditors must be a member of a recognized professional accounting bodies. The external auditors normally address their reports to shareholders of a corporation. In the United States, public accountants are authorized non-governmental type of external auditors may conduct audits and certifications of financial statements of an entity and report on audits for public review. In the United Kingdom , Canada and other Commonwealth nations General Accountants Public Accountants and has served this role.

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Internal Audit System and resources

Internal Audit System and resources:

the main objective of the internal auditors is to "CHECK DAY TO DAY CONTROL" 


For many reasons including independence  problem internal auditor is recruited by Board of directors (BOD). after the solution of Independence problem the new issue arise is familiarity . To solve this problem of familiarity a technique is used called "Outsourcing"

Hierarchy of Internal Audit Dept.           


                                                                 BIG         MEDIUM       SMALL                 
Internal Audit Manager                            1                 1                      1


Assist. Internal Audit Manager                2                 1                      -


Internal Audit Officer                                4                 2                    1-2


Internal Audit Assist. Officer                   10                4                    2-3


Outsourcing technique is so expensive so companies use "Hybrid Approach" i.e. "some hire by yourself and some trained internally " The upper portion of hierarchy like managers and assistant managers are out sourced while juniors and internal audit officers are in-sourced 

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