Difference Between Internal And External Audit

Difference Between Internal Audit And External Audit

The main difference between internal and external audit can be highlighted as follows:

1. Introduction

Internal Audit: Examination of financial and other internal activities of the organization to evaluate the efficiency by an internal auditor or permanent staff of the organization.

External Audit: Examination of financial statement and balance sheet of the firm to ensure the accuracy of financial records.

2. Conducted By

Internal Audit: It is conducted by an internal auditor or staff of the company appointed by the top level management.

External Audit: It is conducted by a stakeholders of the company.

3. Purpose

Internal Audit: To detect weakness of financial and other organizational activities and providing suggestions for improvement.

External Audit: To ensure the correctness of financial statements of the firm.

4. Users

Internal Audit: Report of internal audit is used by the management

External Audit: Report of external audit is used by shareholders of the firm

5. Legal Obligation

Internal Audit: No legal obligation

External Audit: It is compulsory and legally required

6. Nature

Internal Audit: It is continuous in nature and conducted regularly throughout the tear.

External Audit: It is conducted at the end of the period after the preparation of financial statements and balance sheet.

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7. Examination Of

Internal Audit: It examines financial activities, operational activities and other organizational activities.

External Audit: It examines financial statements and balance sheet of the specific period

8. Suggestions

Internal Audit: It provides valuable suggestions to improve operational efficiency

External Audit: It does not provide any suggestions

Internal Audit Vs External Audit (Comparison Chart)

Basis For Difference	Internal Audit	External Audit
Introduction	Examination of financial as well as other internal activities to evaluate the efficiency of the firm	In-depth examination of financial statements to ensure the correctness of financial records
Conducted By	Internal auditor	Stakeholder
Purpose/Objective	To detect the weakness of organizational functions	To ensure the accuracy of financial statements
Used By	Management	Stakeholders
Legal Obligation	Not compulsory	Compulsory
Frequency	Continuous	At the end of accounting period
Examination Of	Financial and non financial activities	Financial statements and balance sheet
Suggestions	Provides suggestions	Does not provide

I hope this post is helpful to understand the difference between internal audit and external audit and to make comparison between them.