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 set by Accounting bodies. Audits are also conducted 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 audits that can be split into three sections:
Internal Auditors are company employees. External Auditors are appointed by a Shareholders’ vote and guided by the company’s directors.
The objectives of Internal Auditors is to examine issues related to company business practices and risks. The objectives of External Auditors is to examine the financial records and issue an opinion on the financial statements.
The Internal Audit department is responsible to the company’s senior management, whereby External Auditors are responsible to shareholders.
If you are a publicly listed firm, a large or medium organization that is looking for funding from investors or 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, 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.