Audit refers to the audit of a financial statement. In other others, a financial audit is the task of examining and evaluating the financial statements of any business or organization to ensure that all the financial records are accurate and fairly show the transactions they claim to represent. The audit session can be conducted either internally by the employees of the organization or it can be done externally by hiring the services of a professional Certified Public Accountant firm like Spacebucks. In this blog, we have tried to showcase the core differences between external and internal audits. Keep reading to learn more.
What is an external audit?
An external audit is a financial examination carried out by independent accountants. This kind of audit is commonly meant for obtaining a certification of the financial statement of a business, which is often required by certain groups of lenders and investors, and for every publicly held business.
What is an internal audit?
Internal audit is the department that is located within an organization responsible for monitoring the effectiveness of its controls and processes. The functioning of internal audit is important in large organizations with higher levels of complex processes, where mistakes or failures in any control or process are quite common to take place.
Comparison between External and Internal Audits
There are a large number of differences between external and internal audit processes. These are as follows:
- External Auditors are those who work for any outside audit firm, whereas internal auditors operate from within the company and are referred to as company employees.
- External auditors are usually appointed by the voting process involving shareholders, whereas internal auditors are always hired by the company itself.
- While it is the responsibility of a CPA to direct all the activities of external auditors, internal auditors do not require a CPA.
- External auditors hold the responsibility to report to shareholders, whereas internal auditors must report to the management.
- It is a must for external auditors to utilize a specific format for all their management letters and auditor opinions whereas internal auditors can go ahead with issuing their findings in any report format.
The role of both external and internal auditors are equally important. While the external auditors examine all financial records of the company and issue opinions related to it, internal auditors are hitched to examining issues related to the business practices and risks of a company. Both of these roles are important and Spacebucks have talented employees taking care of all your internal and external audit requirements at a reasonable rate. To learn more, visit www.spacebucks.in