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Auditing for your Business


24 Minute Accounting

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Unit Video

Unit Summary

There three main differences between internal & external auditors are:  
  • Appointment
  • Objectives
  • Responsibilities

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Hi, in this video you will learn about audits and the differences between Internal & External audits. Audits are official inspections of an organization's accounts, typically conducted by an independent body. Many large organizations also have their own Internal Audit departments. Audits are conducted to confirm that an organization is operating within the guidelines (standards) set by Accounting bodies that govern that organization. Audits are also conducted so as to ascertain that the financial results are presented fairly and that there is no fraud taking place in the organization. There are many differences between internal & external auditors. These can be split into three sections:
  1. Appointment – Internal Auditors are company employees, whilst External Auditors are appointed by a Share holders’ vote and guided by the directors of the company.
  1. Objectives – The objectives of Internal Auditors, is to examine issues related to company business practices and risks, whilst the objectives of External Auditors is to examine the financial records and issue an opinion on the financial statements of the company.
  1. Responsibilities – The Internal Audit department is responsible to the company’s senior management, whereby External Auditors are held responsible to shareholders.
Internal audits are conducted throughout the year, moving from one department to another, whereby their internal audit reports are used by management. External audits are conducted yearly at the close of an organization’s accounts. The (external) audit reports that are generated are not only used by external parties (as mentioned earlier), but also by internal management for Budget meetings, Strategic planning and Annual reviews. If you are a publicly listed firm, a large organization, or just a company that is looking for funding from investors of lenders, favorable opinions on your financial statements by external auditors will help you along your way. If you are lucky to have an Internal Audit department within your organization, then they will guide you in making sure that the company’s results are fair and accurate before the External Auditors come waltzing through your company.

Two-thirds of the Earth's surface is covered with water. The other third is covered with Auditors from Headquarters. Norman Ralph Augustine