This article explores the differences between internal and external auditors as well as internal audits and external audits.
The purpose of internal and external audits differ; however, they are complementary processes that can help ensure a business uses its funds efficiently whilst also meeting any legal regulations that the company may be subject to.
That being said, there are many concrete differences between the two types of audits, as well as the auditors that perform them.
Allen Audit & Advisory have a wide breadth of experience and can provide you with extensive knowledge and produce high-quality work while also ensuring you receive personal service and the attention to detail of a boutique Gold Coast audit firm. Contact us today.
First up: what are the differences between internal and external auditors?
There are several differences between internal and external auditors.
#1. Appointment
Generally, external auditors are appointed by the shareholders of a company, while internal auditors are often employees of a company but can also be appointed externally and report to an audit committee and/or directors. At Allen Audit & Advisory, we can provide both internal audits and external audits.
#2. Area of Focus
Internal auditors generally focus on an organisation’s processes and control systems, providing evaluations on financial and operational business activities. They analyse and set up the governance, risk, and control systems of the company and ensure the implementation of all the policies and procedures implemented.
Internal auditing is a diverse process that ensures a company follows correct procedures and that it functions efficiently. Generally, an internal auditor will also look for problems that may come out during an external audit and take care of them before it gets that far.
External auditors mostly focus on ensuring that the policies and procedures of the organisation are adequate and meet regulatory requirements and standard practices. They focus on implementing financial compliance and accuracy.
From this we can see that the scope of an internal auditor’s work is more diverse than that of an external auditor.
#3. Roles of Internal and External Auditors
Internal auditors must understand and examine the processes within a company. When performing an internal audit at Allen Audit & Advisory, we spend a lot of time with our clients before and during the process in order to ensure we understand exactly what your business is about. This usually leads to long-term relationships and involves assessing the processes of a company and analysing how to implement changes to further develop and optimise these procedures.
External auditors, on the other hand, examine the financial records and control systems of a company. After their audit, they give a report of their findings with a view to providing an opinion on the financial statements, which you can then provide to ASIC.
#4. Mode of Operation:
Internal auditors work with staff and management and provide information on how the business can function better; external auditors are responsible for independently reviewing financial statements and ensuring they meet any regulatory standards, reporting back to the stakeholders.
At Allen Audit & Advisory, we can also provide remote external audits to Australia and New Zealand, so contact us today for all of your internal and external audit needs.
#5. Engagement Period:
Internal auditors generally provide auditing and control services related to the company’s finances, business practices and risks over an extended period of time. External auditors are appointed for a certain period and once the audit is completed, their engagement with the company terminates.
Internal Audits Vs External Audits
Now that we understand the differences between internal and external auditors, let’s look a little more closely at just what the differences between the actual audits are.
What is an internal audit?
Internal audits look at a company’s internal controls and systems and help organisations achieve their goals. Internal auditors work closely with management to thoroughly review all systems and operations within a company to ensure smooth operation.
Internal audits look at all aspects of a company, from finances to IT. The internal auditor will assess all tangible facets of a business such as supply chains and IT systems, as well as intangible areas such as company culture and ethics.
Essentially, internal audits are thorough analyses of all aspects of an organisation that exist to evaluate the efficacy of systems put in place and to recommend any improvements if necessary.
What is an external audit?
External audits, on the other hand, involve a company or business hiring an independent auditor to help them verify that their internal accounting procedures and financial operations run efficiently and meet legal standards. External auditors are registered with ASIC.
There are a variety of benefits to getting an external audit:
- They can help prevent fraud
- They ensure compliance with the relevant legislature
- They reassure customers and the general public that your company is up to scratch
- They can help ensure you get a loan from the bank
- They can help improve the efficiency of your business
So you can see that while external audits may seem a little intimidating, they can provide great benefits to your company.
Allen Audit & Advisory can provide you with internal and external audits
Audits, whether internal or external, are a useful tool for any company. While they have different areas of focus, both are geared towards ensuring that a company’s records, processes, and financials are efficient, accurate, and comply with the law.
Audits give a company’s shareholders and management confidence by ensuring that the company’s accounts are true and fair and that internal processes are efficient.
With our combined experience of more than 30 years at Allen Audit & Advisory, there are few things our auditors haven’t already seen which allows us to give expert audit and assurance services in Australia or New Zealand.
We are able to complete both the financial and compliance aspects required for AFS Licensees which makes us uniquely qualified for a boutique audit firm on the Gold Coast. So whether you need an internal audit or an external audit, contact us today.
