Differences between Internal Auditors and External Auditors
Mandate:
Although Internal Audit does have a degree of focus on the financial aspects of the organisation, it is essentially not a financial discipline - unlike its counterpart External Audit. Its multidimensional nature mandates a much broader scope in the organisation than that of External Audit.
External Auditors have a statutory obligation to shareholders and the public on the accuracy of the annual report and the financial statements
Internal Auditors have a duty to senior management and the board via the audit committee on the state of governance, risk management and control within the organisation.
Areas of Focus:
External Auditors focus on finance and accounting
Internal Auditors focus on the whole organisation, all departments, functions and operations
Independence:
External Auditors are independent external assurance providers to the organisation and have a statutory obligation
Internal Auditors are part of the organization but independent of management, they provide internal audit assurance and report to the audit committee.
Risk and Control:
External Auditors identify risks and assess controls over financial reporting and place reliance on controls to the extent practicable. Emphasis is on gaining sufficient audit evidence to conclude that the financial statements present a true and fair view.
Internal Auditors provide an independent view on the organisation’s governance, risk management and control processes. They review, the adequacy of control design to ensure that risks are effectively managed, and then test operation of key controls to ensure they are operating as intended and therefore are effective in managing the organisation’s risk.
Driving Results:
External Auditors make recommendations to improve the financial control environment
Internal Auditors make recommendations to improve the overall internal control environment and to improve the operational performance of the organisation as a whole.
Read the text and answer the following questions
1.What types of audit does the author mention?
2.How can we define an audit?
3.Which components are the basis of the auditing process?
4. What standards of fieldwork does the author mention?
5.What are the main standarts of the audit report?
6. What Is an External Audit?
7.What are differences between external audit for governments and for private business?
8.What are the Internal Auditors responsible for?
9. What are the Differences between Internal and External Auditors?
10.What do we call internal audit?
True or false
1.An audit is the process of evaluation or analysis of something to determine its accuracy or safety, or is the document that declares the result of such an analysis or evaluation.
2.The auditing process is not based on steel rules, standards, concepts, procedures, and
reporting practices.
3.The examination can be performed by a person having knowledge in audit.
4.The work of auditors must be random and uncontrolled.
5.An external audit is a review of the financial statements or reports of an entity by someone
affiliated with the company or agency.
6.The internal auditor must be well versed in the strategic objectives of the organization.
7.An external auditors work closely with line managers to review operations and gives them
some advices.
8.Theresre no differences between Internal and External Auditors.
9. Internal auditors focus on the whole organisation, all departments, functions and
operations.
10. External audits are typically conducted twice a year.
Answer key:
1.T. 6.T.
2.F. 7.F.
3.T. 8.F.
4.F. 9.T.
5.F. 10.F.
Complete the sentences with the correct word:
Private sector ,external audit,statements, reports, conclusion, uantitative, iscal, examination,standard,process
……………… make recommendations to improve the financial control environment.
Audits should always be an independent evaluation that will include some degree of ………… and qualitative analysis.
The auditing ………… is based on standards, concepts, procedures and reporting practices.
General standards are brief ……….. relating to such matters as training, independence and professional care.
……………. of reporting outline the required auditing standards relating to the audit report and its contents.
The ………. shall contain either an expression of opinion regarding the financial statements.
The ……………. can be performed by a person or persons having knowledges in audit.
External audits are typically conducted once a year at the end of the company’s or government’s ……….. year.
The more important feature of an external audit is the …………. of the auditor.
In the …………… , external audits can be used to determine investment levels in the business.
Answer key
1.External audit make recommendations to improve the financial control environment.
2.Audits should always be an independent evaluation that will include some degree of quantitative and qualitative analysis.
3.The auditing process is based on standards, concepts, procedures and reporting practices.
4.General standards are brief statements relating to such matters as training, independence and professional care.
5.Standards of reporting outline the required auditing standards relating to the audit report and its contents.
6.The report shall contain either an expression of opinion regarding the financial statements.
7.The examination can be performed by a person or persons having knowledges in audit.
8.External audits are typically conducted once a year at the end of the company’s or government’s fiscal year.
9.The more important feature of an external audit is the conclusion of the auditor.
10.In the private sector, external audits can be used to determine investment levels in the business.
Vocabulary notes
Слово |
Переклад |
Verification Assessment
Fairness Quantitative Qualitative Imply Evidence Supervise Reliance Disclosure Assertion Affiliate Governance Scope Evasion Compliance Expenditure
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Перевірка,підтвердження,звіряння Думка,судження,оцінка майна для оподаткування, обкладання податком,розмір податку Справедливість,незаплямованість Кількісний Якісний Означати,натякати,мати на увазі Свідчення,доказ,показання,очевидність,наявність Контролювати,наглядати,керувати,завідувати Опора,ставка,упевненість,довір'я Розкриття,вияв Твердження,заява,обстоювання,судження Філія,компаньйон,учасник, приєднувати Управління,керівництво,підпорядкованість Обсяг,масштаб,розмах,межі Ухиляння,обхід,виверт Дотримання, згода,піддатливість Витрачання,використання
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1.http://en.wikipedia.org/wiki/Audit
2. http://www.inc.com/encyclopedia/audits-external.html
3. http://www.iiasa.org.za/about-us/about-the-profession/role-of-internal-audit.html
4. http://www.ehow.com/about_4894466_what-external-audit.html