Every company or organization must have an auditor in charge to investigate it. So that you better understand whether you should choose an internal or external auditor, try to know the difference between internal and external audits first.
When we talk about internal and external audits, many entrepreneurs have doubts about their differences and applications. Therefore, we have prepared a summary below that explains the peculiarities of each one of them, according to the main aspects involved.
FREQUENCY
The external audit takes place at previously chosen intervals. That is, it can focus on a bimester, a quarter, a semester, and so on. Thus, this type of analysis has a beginning, a middle, and an end. While internal auditing takes place constantly. In this case, the intervals are established more for planning purposes, usually annually.
OBJECTIVES
The external audit is performed for external purposes, as the name implies: to gain the trust of investors, for example. But it can also be to take credit from banks. On the other hand, an internal audit aims to measure risks to refine management with financial, operational, and accounting data.
OBLIGATION
In some situations, external auditing is mandatory. This is the case for public and large companies that are supervised by regulatory bodies. Internal audit, on the other hand, is a choice of the business itself to improve domestic processes.
In the external audit, the auditors are not subordinated to the board of the contracting company. In addition, the reports produced are not only delivered to management but are also forwarded to third parties, such as partners of interest to the company.
In internal auditing, the auditor refers to the company’s management, and may or may not belong to the staff.
Therefore, talking about internal and external audits can be the key for companies to understand the day-to-day impacts on their numbers and phenomena.
In this way, auditors can help your company to understand what is missing to open the doors to auditing. In addition, they pave the way so that your business is always ready to go through these fine-toothed combs.
Is the scope of intervention of internal audit and external audit the same?
The scopes of intervention are different between internal audits and external audits. Internal auditors work on compliance, risk management, and governance processes. Their interventions concern all the activities, all the departments, all the trades, and all the processes of their company.
The purpose of the internal audit is to assure the degree of control of activities and risks within the company.
The external auditors, on the other hand, focus on the quality of the annual accounts. About the statutory auditors, it should be remembered that this is a legal mission, that is to say, provided for by law, which in this sense has a character of general interest.
Indeed, the financial information of a company does not concern only its managers and its owners. Since this information is published, it concerns anyone who consults it. It is therefore imperative that it be checked by a person independent of the company. This is the role of the external auditors.
The auditors thus give an opinion on the regularity, sincerity, the fidelity of the annual accounts about the assets of the company, its financial situation, and about the results of its activities.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by
CA Aman Aggarwal
AKGVG & Associates