Auditing is a broad field which covers all the aspects of an organization. The term audit refers to examine something censoriously. Also, it refers to report generated from a serious examination. An audit questions the accuracy of the financial statements, the effectiveness of the internal control as well as the entire operations of an association. To archive various audits objectives in an organization, the audit function divides into two roles, the internal and the external audits. The two audits scrutinize a firm’s activities and come up with reports expressing their imitations of the examination.
What does Internal audit mean?
An Internal audit refers to an independent assessment function that is set by the management of an association. Its purpose is to review the internal control system as a provision to the relationship. The primary goal of every internal audit report is to prompt organization action to implement endorsements for modifications leading to enhancement in performance and control.
What are the Characteristics Internal audit?
The internal audits are remunerated workers of the organization. Their effectiveness depends considerably on the quality, training and the capability of the staff. The internal audits cannot be easily removed; it calls for a board of directors in the organization to suck one. Even though they operate in conjunction with the external audits their results cannot be affected by poor communication. They depend on their policies when coming up with plans in an association with management. The internal audits offer an assurance that the organization is performing powerfully, Review the reliability of the financial reports for reasonableness and accuracy.
What does External audit Mean?
An external audit is also known as the Financial audit’ or ‘Statutory audit, the central role of external audit is to offer an option on the financial statements of the firm. The external auditors use the work of internal audits to come up with an opinion. Besides, it the role of the external audits to assess and evaluate the efficiency of the internal audit work.
What are the Characteristics of External audit?
An external audit is chosen by the shareholders of the firm. They are much concerned with expressing their opinions whether the financial reports are accurate and genuinely presented. Internationally, the competence of the external audits can never be archived if there are communication barriers between them and the internal auditors. It is only the stakeholders can remove the external audits in a single meeting. They must follow the rules and the regulations given by the regulatory and legislative board of the country
Similarities between Internal Audit & External Audit
Freedom of Internal Audit and External Audit
Both the internal and external audit works independently. The independence perceives that both have a working independence from liberty of minds to physical.
Reporting of Internal Audit and External Audit
Both internal audit and external audit present their reports after their task is over. However, their statements differ in format and objective.
Costing of Internal Audit and External Audit
The two audits costs the entity. Unfortunately, this is challenging small associations to engage audit firms in reviewing their financial statements.
Work standard of Internal Audit and External Audit
Both the internal and the external audits require the high quality of works to guarantee that the results of their examinations are reliable by the associated parties.
Relations of Internal Audit and External Audit
Both the external and internal auditor are involved in testing routines, this includes anything to do with the examination and scrutinizing of transactions. In case the procedures were awful, both audits would be worried. In all their dealings, they must fully embrace the information systems since there is a tremendous managerial control element and it’s also very essential to the financial reporting process
Both the internal and the external audits are based on a professional discipline and functions to professional principles. They both cooperate closely in their duties. However, they are both linked intimately by the organization’s scheme of internal control
Summary of Internal Audit and External Audit
The internal and external audits are involved in examining the accuracy of the financial statement of an organization. They scrutinize the effectiveness of the internal control and dealing and the entire operations of a company. Internal audits involve independent assessment function founded by the management of an association. The external audit concentrates in offering a choice on the financial statement of the firm. Even though the two audits have different roles, they still have some similarities. They both monitor the technique in which the organization conducts business. They both have freedom of operation. They are both concerned with the formal audit reports on firm’s accomplishments and they both cost entity.