What is the Difference Between Internal and External Audit?

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What is the difference between internal auditing and external auditing? This is a frequently asked question.  Although the word “audit” in both are similar, there are distinct differences between the two job functions.  Before directly answering the question, let’s take a look at which each is and/or does.

Both are what you would call “assurance providers”.  They provide stakeholders with reasonable assurance that risks are appropriately mitigated.  External auditors are primarily concerned with financial statement presentation.  In other words, do reported “numbers” or financial statements provide a fair representation of the organizations financial position?  As a result, there is a lot of effort surrounding controls that impact revenue, expense, income or liability line items.  In the United States, significant financial reporting errors resulted in the Sarbanes Oxley Act (SOX), which essentially requires testing of controls deemed “key” the organization’s financial statements.

Internal auditors also provide reasonable assurance that risks are appropriately mitigated.  However, an internal auditor’s scope extends beyond financial statements.  The scope may include an organizations operations, information technology, strategic initiatives, fraud investigations, process and control optimization and compliance.

So, what is the difference between internal auditors and external auditors?  Purpose is the primary differentiating factor (i.e. financial statements vs operations, technology, etc).  Both are assurance providers and can leverage experiences to better benefit clients.

Purpose is but one broad difference between the two.  Can you think of others?


Robert Berry (107)

Robert (That Audit Guy) Berry is a risk, compliance and auditing advocate, educator and innovator. He helps good professionals become better by creating articles, web services and training that allow them to expand their knowledge network.

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