Every organization performs auditing of its accounts and financial statements. The main object of every business is to improve shareholders value. As shareholders are the owners of the company that is why they have right to know the financial statements of the business and they also have authority to claim on it.
To make shareholders satisfied company do audit of its accounts and financial statements. Some organizations do audit annually only and some organizations do it throughout the year also.
An annual audit is known as external audit and audit done by company throughout the year is known as internal audit.
Here are some common differences between internal and external audit.
Internal Audit and External Audit
Internal Audit is done by internal auditor
For external audit company hire an external audit team.
Internal auditor takes salary from company
External auditor takes commission from company
Internal audit helps to management to take necessary steps for internal control
External audit helps the management to improve the purity of work
Internal audit report helps to take decisions
External audit report shows the actual picture of the financial statements
Internal audit report do not provide opinion on financial statements
External audit report provides an opinion on the financial statements
Internal auditors check accounts directly
External auditors may take the report of internal auditor to shorten their work
Internal auditor evaluates the work of accountant
External auditor evaluates the work of internal auditor
Internal auditor appointed by the management of the company
External auditor appointed by the shareholders of the company
Internal audit report conveyed to the management of the organization and the to the board of directors
External audit report conveyed to the shareholders of the company
Internal audit report remains confidential
External audit report does not remains confidential
Internal audit work is done by the employees of the organization
External audit work is done by the certified chartered accountants
Internal audit is a continues process External audit is annual basis
Internal audit check operational efficiency of the organization
External audit checks fairness of the financial statements of the organization
Internal audit reviews the regular activities of the business and give suggestions to the management to improve the performance
External auditor only review to the financial statements
Internal auditor is answerable to the management of the organization
External auditor is answerable to the shareholders of the organization
Organization have authority to remove internal auditor Shareholders or stakeholder have authority to remove the external auditor