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External vs. Internal Audit

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Difference Between External Audits and Internal Audit

External audits

  • Conducted by third-party auditors who are Chartered or Certified Accountants.
  • Statutory requirement for certain organisations.
  • Provides an assessment of the accuracy and reliability of a company’s financial statements.

Internal audits

  • Conducted by employees of the organisation, usually an internal auditing department.
  • Main focus on operations and systems, not financial records and accountancy.
  • Legal requirement in a few special circumstances (Health Authorities, Universities, National and Local Government).
  • Objective is to achieve Value-For-Money through efficiency, economy, and effectiveness.

You can form an internal audit function within your organization by hiring a professional with knowledge of your type of organisation and a background in audit work, or you can opt to contract a firm that specialises in auditing services.

Many types of highly specialised auditors work in specific fields, such as electronic data processing, engineering, healthcare, banking, and the law. In general, it would be advisable to put together an auditing team that is specially trained in the industry your company belongs.

Sourcing experienced auditors is becoming easier, as auditing is becoming more and more an essential part of many organisations’ management structures as more companies realise the benefits.