Internal Audit vs. External Audit

Internal Audit vs. External Audit — Is There a Difference?
ADVERTISEMENT

Difference Between Internal Audit and External Audit

Internal Audit vs. External Audit

Internal audit is carried out by the people working in the firm themselves, while external audit is conducted by people who are working for a private firm.

Internal Audit vs. External Audit

Internal audit is reported to the member of the committee set up by the firm while external audit is presented to a neutral who can give their option later on.

Internal Audit vs. External Audit

External audits are conducted by the shareholders in a company who are suspicious of some wrongdoings while internal audits are carried out to make sure everything is working well in the company.

Internal Audit vs. External Audit

Certified Public Accountants responsible for carrying out an external audit while they are not a requirement for internal audits.

Internal Audit vs. External Audit

External audits have to follow a particular report format while internal audits can be in form of random reports.

Internal Audit vs. External Audit

Internal audits are used to gain suggestions and improvements while external audits are there to make sure every client is getting equal opportunity.

ADVERTISEMENT

Internal Audit vs. External Audit

External audits are carried once a year at most while internal audits can be done whenever the need be.

Internal Audit vs. External Audit

External audits carry a proper investigation of money coming in and out while internal audits do not have the terms of reference to do that.

Comparison Chart

Internal AuditExternal Audit
It is carried out by the people working in the firm themselves.It is conducted by people who are working for a private firm.
Report
It is reported to the member of the committee set up by the firmIt is presented to a neutral who can give their option later on.
Aim
Are carried out to make sure everything is working well in the company.Are conducted by the shareholders in a company who are suspicious of some wrongdoings.
Post
They are not a requirement for internal audits.Certified Public Accountants responsible for carrying out an external audit
ADVERTISEMENT

Definition of Internal Audit

Internal audit is the one which is carried out by the company for the company. Someone from the employees is appointed who has relative experience and then is appointed with the task of finding the solution. It does not have to be a CPA and does not need to report to a private person. All the matters of company stay between the people and they make sure that the issues are solved in the best possible way. There is no format requirement for such types of audits since they are in-house, different ones such as a formal report, bullet points, a letter or even power point presentation can be used to convey the solution. There is no limit to how many times it can be conducted over the year. There can be many issues which need addressing therefore, several audits can be carried out at the same time.

Definition of External Audit

These types of audits are carried out by a private firm of an independent company. This is carried out if a shareholder wants and has the full backing of the directors. There is a requirement of a competent professional which is usually a Certified Public Accountant who has the knowhow of all the matters and is bound to report to a specific person who is not related with the company in any way. This results in a neutral analysis of the company. Main aim is to make sure that one client is not getting all the favors and others being ignored while all the money related matters have transparency. A proper report structure has to be followed since it is a professional work while the audit can only be carried out once a year since multiple ones will result in company not being able to perform its daily tasks in an orderly manner.

Conclusion

In a nutshell, this article details the main difference between the two terms of Internal Audit and External Audit. There are many terms relating to these and therefore can become utmost important. It will help individuals in developing a clear understanding of the topics and get first-hand knowledge about the definition and the scope of it.