The Difference between Internal Auditor and External Auditor

The difference between internal auditor and external auditor

The difference between the internal auditor and external auditor

The less monitoring and review, and the greater the administration’s neglect of projects, the result is an increase in fraud, fraud, and illegal transactions, and thus the confidence of dealers in the institution or facility decreases, and since the accuracy and quality of financial reports and continuous improvement of performance, are important things that are required to be done by the management The auditor or the internal auditor, and the external auditor or auditor, to ensure efficiency, effectiveness and performance evaluation.

Certified Professional Internal Auditor – CPIA (USA)

The audit process is one of the most important pillars on which the foundations of the institution or commercial establishment are based and is considered one of the main reasons for its continuity, survival, and long-term success. The audit body is appointed after approval by the Board of Directors for the purpose of auditing the company.

Internal audit and external audit are two main components in the financial audit process in all businesses, institutions, and companies, regardless of their activities or types, whether private or governmental.

Internal audit

  • Internal audit, or internal audit as accounting financial programs that arose to meet the management need to activate the tightness of executive control, and to grant internal audit its independent authority to work from within the institution to serve the objectives of the control management and to review the accounting, financial and other operational processes.
  • It is a function that provides sufficient and objective guarantees in everything related to the effectiveness and efficiency of the work of the internal control system and risk management in the facility through the appointment of an internal auditor with financial experience by the Audit Committee, to review and control the various operations (administrative, accounting, and financial) according to the company’s system to ensure the proper functioning work, and ensure that, and the audit committee must ensure that the internal audit function has access to and knowledge of financial resources.
  • And then access to relevant information from all departments of the institution or facility to conduct a successful audit, submit audit reports to the Board of Directors and provide appropriate proposals, recommendations, and solutions on how to improve the company’s internal audit system.
  • There are some small companies that do not adopt the internal audit function in their structure, and there is only the external audit function, so they must consider establishing a structure for the internal audit function.

External Audit

  • External audit or external audit is an independent accounting function that operates through a specialized intermediary from outside the institution, whose task is to carefully examine documents and accounting books, to express an impartial and objective opinion. A report showing the fairness of the general budget for the financial position of the institution, and the fairness of its final accounts on the result of its work for the financial period that was audited.
  • The task of the external audit involves providing a real vision and an effective evaluation of the work of the internal audit. Financial specialists believe that the internal audit function can be replaced and replaced by the external audit function. Some believe that the external audit function can be managed by the external auditor, while others see the importance of the audit function. The internal audit work.

The difference between internal audit and external audit

  • There is a difference between an internal and external audit, as the internal audit is functionally conducted by the company’s employees, or through the internal audit committee of the company or institution, while the external audit is carried out by a party outside the company, and the working circumstance may require that the audit committee meet twice a year on Least to conduct an audit to see how effective the internal audit function is.
  • It is imperative for the board of directors to review the effectiveness of the audit committee at least once a year, since the external auditor is appointed by the shareholders and the function replaces the internal audit, the external audit is considered more credible.

External auditor

  • The external auditor is responsible for determining the credibility and fairness of the balance sheet and financial statements, especially those approved by external parties.
  • The external auditor works completely independently from the main company management, while the internal auditor is under the authority of the company’s management and serves their directions and provides them with the necessary data.
  • The external auditor is appointed by the company’s general assembly.

Internal auditor

  • The auditor or the internal auditor is among the company’s employees and is taken over by the company’s management.
  • Responsible for determining the efficiency and safety of the company’s accounting system so that its role is only an oversight.
  • The function of the modern internal auditor is based on an independent basis and is supervised by an audit committee composed of members from inside and outside the facility, but it is administratively affiliated with the department to the CEO.
  • The function of the auditor or the internal auditor is no longer traditional but rather takes modern means to reassure the board of directors of the proper progress of work.
  • The role of the modern internal auditor is based on verifying and verifying the integrity of the internal control systems and provides an advisory role to improve workflow.

The tasks of the internal auditor

The main task of the internal auditor or internal auditor are to provide assistance to the management of the facility in carrying out its responsibilities by examining, evaluating, and expressing opinions on policies and plans in relation to the following matters:

  • The efficiency of the accounting and financial systems in place within the facility and the efficiency of the control systems over the operations of the facility.
  • Implementation of the policies and objectives set by the organization.
  • Estimating the risk ratios to preserve the facility from all the risks that may affect its money and assets.
  • The accuracy of the accounting data and its conformity with those contained in the books and records.
  • Implementation, follow-up, and evaluation of performance in order to achieve goals in terms of quality and achieve administrative adequacy.

The internal auditor, according to the functional structure, is appointed by the internal audit department of the facility. He may be a legal or professional auditor, or a professional with his office and his own work, such as accountants and legal auditors, and he may be affiliated with one of the governmental control bodies. As for the place of examination, it is according to what determines the purpose of the audit.

The difference in the scope of work and objectives

  • The internal auditor aims to serve the management of the facility, while the external auditor serves the shareholders, investors, and holders of obligations by expressing his opinion on the appropriateness of the financial statements of the facility.
  • The internal auditor is responsible only to the management of the facility, and the external auditor is responsible to third parties (shareholders).
  • The internal auditor performs continuous examinations and audits throughout the year.
  • The external auditor performs the examination and auditing process, usually after the end of the fiscal year.
  • The external auditor enjoys complete independence from management in the examination process and expressing an opinion.
  • As for the internal auditor, it enjoys partial independence from the administration, but it serves other departments.
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