INTERNAL 1

AUDIT
vs
EXTERNAL
.
AUDIT
 refers to the department located
within a business that monitors the
efficacy of its processes and Fraud
controls. Detection
Internal
 The internal audit function is Safeguardi Control
especially necessary in larger ng Of Assessme
organizations with high levels of Assets nts
Internal
process complexity, where it is
Audit
easier for process failures and
Staff's
control breaches to occur. RESPONSIBILITI
ES Legal And
 Internal audit is especially Risk Regulator
necessary in a publicly-held Assessme y
business, which must attest to the nts Complianc
robustness of its systems of Process e
internal control. Assessme
nts
 is an independent examination
of the financial statements
prepared by the organization.
 It is usually conducted for
statutory purposes (because the
law requires it).
 An audit results in an audit
opinion about whether the
financial statements give a ‘true
and fair’ view of the:
 state of affairs of the
organization and
 Operations for the period
What is the
difference
between
INTERNAL
and
EXTERNAL
Audit?
 OBJECTIVE
Internal Audit External Audit
 The internal auditor  The external
seeks to advise
management on auditor seeks to
whether its major test the
operations have sound
systems of risk
underlying
management and transactions
internal controls. that form the
basis of the
 PURPOSE
Internal Audit
External Audit
 considers whether
 considers whether
business practices are
helping the business the annual
manage its risks and accounts give a
meet its strategic 'true and fair view'
objectives and are prepared in
accordance with
- it can cover operational as legal requirements.
well as financial matters
 INDEPENDENCE
Internal Audit External Audit
must be  is independent
from its client (the
independent organization),
from the its independence
audited being specific to
activities. liberal professions.
 Frequency of the
audit
Internal Audit External Audit
 is performed during the
 is an activity
entire year, having
specific missions with a yearly
Established in according frequency, as a
with the level of risks rule, at the end
identified for each
auditable entity of the year
 Who are the
auditors?
Internal Audit External Audit
 Internal auditors  External auditors are
can be employed an outside firm of
by the business or accountants who are
'Registered Auditors'
outsourced. While an
accounting background
(not all accountancy
is common, they can firms are).
also come from other
backgrounds
 To whom does the
auditor report to?
Internal Audit External Audit
 Internal  primarily to the
shareholders or
auditors report the trustees for
internally. an
 Relevant Managers unincorporated
 Audit Committee or BOD charity
 How is the audit plan
set ?
Internal Audit External Audit
 The internal  The external audit
audit agenda is firm will set its own
program of work
set internally in
based on its
the light of the assessment of the
business's risks risks of the
and objectives. accounts being
materially
 Approach of internal
control
Internal Audit External Audit
 regards the internal
 regards all the control system only
aspects from the materiality
regarding the perspective, which
permits them to
organization’s eliminate those errors
internal Control that aren’t significant,
because they don’t
system have influences over
the financial results.
 What happens after
the audit?
Internal Audit External Audit

The internal audit follow up will
be agreed on a case by case
 There is no
basis. external audit
 It can include looking to see follow up, until
whether recommendations the planning
have been implemented and/or
consultative help to guide the stage of the next
implementation of year's audit;
recommendations. when past issues
 What sort of report
will they receive?
Internal Audit External Audit
 External auditors' main
 Internal auditors
report is in a format required
provide a tailored
by Auditing Standards and
report about how the
focuses on whether the
risks and objectives accounts give a true and fair
(of the business area view and comply with legal
being audited) are requirements.
being managed.
 If other things come to light which the
auditors think should be brought to the
client's attention they will be reported
FOR LISTENING!!!!