Audit procedures are an essential part of any company's financial management system. They help to ensure that a business's accounting records are accurate, complete, and comply with relevant laws and regulations. There are two primary types of audits performed in a company - internal and external auditing.

This article aims to explain the differences between internal and external auditing.

Internal Auditing

Internal auditing is a process where a company's own employees or a team of internal auditors conduct an independent assessment of the company's financial records, policies, and procedures. The primary objective of internal auditing is to evaluate and improve the effectiveness of the company's internal controls, risk management, and governance processes.

Internal auditors work closely with the management team to identify areas of the company's operations that require improvement. They perform risk assessments, review financial statements and other documents, and evaluate the efficiency and effectiveness of the company's internal controls.

The internal auditors then provide their findings in a report to the management team. The report outlines potential risks, control weaknesses, and recommendations for improvements. The management team can then use this information to make informed decisions about improving the company's financial management systems.

External Auditing

External auditing is a process where an independent auditor, who is not an employee of the company, conducts an audit of the company's financial statements. The primary objective of external auditing is to provide an independent opinion on whether the company's financial statements are accurate and provide a fair representation of the company's financial position.

External auditors are typically appointed by the company's shareholders or board of directors. The external auditor reviews the company's financial records, policies, and procedures to determine whether they comply with relevant laws and regulations. They also evaluate the company's internal controls and assess the risk of fraud or error in the financial statements.

The external auditor then provides an opinion on the financial statements in a report. The audit report includes an opinion on whether the financial statements give a true and fair view of the company's financial position and whether the company has complied with relevant accounting standards and regulations.

Key Differences

There are several key differences between internal and external auditing. These differences include:

1. Independence

Internal auditors are employees of the company and, therefore, may have a conflict of interest when conducting an audit. External auditors, on the other hand, are independent and are not affiliated with the company.

2. Objectives

Internal auditors focus on evaluating and improving the company's internal controls, risk management, and governance processes. External auditors focus on providing an independent opinion on the accuracy and completeness of the company's financial statements.

3. Reporting

Internal audit reports are provided to the management team, while external audit reports are provided to the company's shareholders or board of directors.

4. Scope

Internal auditors have more flexibility in the scope of their audit and can focus on specific areas of the company's operations. External auditors must follow specific auditing standards and guidelines and have a broader scope of the audit.

Conclusion

Both internal and external auditing are essential components of a company's financial management system. Internal auditing helps to improve the effectiveness of the company's internal controls, risk management, and governance processes.

External auditing provides an independent opinion on the accuracy and completeness of the company's financial statements.

Understanding the differences between internal and external auditing can help companies to make informed decisions about which type of audit is most appropriate for their needs.

If you are looking for a well-qualified and experienced audit team, look no further than Bloom Recruitment. Our internal & external audit recruitment process is designed to identify the candidates who possess the necessary qualifications, experience, and aptitude to excel in these roles. Contact us today to learn more!