WHAT’S THE DIFFERENCE BETWEEN AN INTERNAL AND EXTERNAL AUDIT?
Although appearing seemingly similar as the two functions share a common word, they are in reality quite different. Larger organisations tend to implement both to ensure that their records, effectiveness of the company’s internal controls, regulatory compliance and financial reporting are closely examined on a perpetual basis.
WHAT IS AN AUDIT?
an official inspection of an organization’s accounts, typically by an independent body.
When an accountant audits an organization’s accounts, he or she examines the accounts officially in order to make sure that they have been done correctly
Definition: Audit is the examination or inspection of various books of accounts by an auditorfollowed by physical checking of inventory to make sure that all departments are following documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organisation.
Aside from the importance of the legal requirements for a statutory audit, the undertaking of the audit itself provides important and valuable insight.
An audit determines whether an organisation is providing a true and fair view of its financial performance and position, which on its own is something any organisation wants to achieve.
Providing comfort over the accuracy of management accounts, or revealing systematic errors occurring throughout the year, a year end audit is critical to decision making for an organisation placing reliance on management information. The process through which an audit is undertaken challenges the robustness of the internal controls and processes an organisation has in place, giving an external perspective and valuable feedback.
AN EXTERNAL AUDIT IMPROVES INTERNAL SYSTEMS AND CONTROLS
AN EXTERNAL AUDIT PROVIDES CREDIBILITY
AN EXTERNAL AUDIT GIVES SHAREHOLDERS CONFIDENCE