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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what is audit and assurance

Audit and Assurance:

We need assurance to,

• Increase confidence
• Reduce risk

It is very complicated topic to understand but you can understand it completely assurance and element of transaction through this example

For example if you want to purchase a house and you consult a person for this purchase. What are the elements that could be a part of this transaction?

1.      User (i.e. you)

2.      Subject Matter (in this case it is the House to purchase)

3.      Practitioner ( the consultant with which you consult)

4.      responsible party (the party through which you want to purchase house)

5.      Criteria (the terms and conditions of buying)

In case of companies assurance, companies want assurance of their companies and they consult with practitioners i.e. Audit Firms. It increases the confidence of the companies and reduces the risk.

The following two types of assurance that auditors could give it to you

Types of Assurance 

there are only two types of assurance which are reasonable assurance  and  limited assurance

Reasonable Assurance	Limited Assurance
High Level	Moderate Level
Positive Report	Negative Report

Positive report:

Positive report doesn’t mean that practitioner is saying that every thing is absolutely correct but they broadly speaking say” it is repayable”

Negative Report:

Mean that Practitioners say “nothing has comes to our attention that causes us to believe that Financial statement are prepared in all material aspect in accordance with applicable reporting framework.

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Internal Audit VS External Audit

Internal Audit VS External Audit
while thinking talking about Internal Audit and External Audit people often intermix with each other the best way to know about them and the difference of them is the following table.
I am sure using this table you will never  misunderstand Internal Audit VS External Audit.

	Internal Auditor	External Auditor
Objective	To add value	Enable to express the opinion on financial statement
Reporting to	Board of Directors + Audit Committee	Share holders
Scope	Every operation of Org.	To check financial statement
Relationship with Co.	Employee, but new concept is out sourcing	Independent from company appointed by shareholders

well this was my work about Internal Audit VS External Audit.. hope you will like this.

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