Here is a clearly differences and similarities

“Internal Auditor” versus “External Auditor” sorted out:

The Different Objectives

The External Auditor:

The external auditor seeks to test the underlying transactions
that form the basis of the financial statements.

The internal Auditor:

The internal auditor, on the other hand, seeks to advise
management on whether its major operations have sound
systems of risk management and internal controls.

The Main Differences

There are, however, many key differences between internal

and external audit and these are matters of basic principle that
should be fully recognized:

1. The external auditor is an external contractor and

not an employee of the organization as is the
internal auditor. Note: however, that there is an
increasing number of contracted-out internal
audit functions where the internal audit service is
provided by an external body.
2. The external auditor seeks to provide an opinion on
whether the accounts show a true and fair view,
whereas internal audit forms an opinion on the
adequacy and effectiveness of systems of risk
 management and internal control, many of which
fall outside the main accounting systems.

The Main Similarities

The main similarities between internal and external audit are

as follows:

1. Both the external and internal auditor carry out testing

routines and this may involve examining and analyzing
many transactions.
2. Both the internal auditor and the external auditor will be
worried if procedures were very poor and/or there was a
basic ignorance of the importance of adhering to them.
3. Both tend to be deeply involved in information systems
since this is a major element of managerial control as
well as being fundamental to the financial
reporting process.
4. Both are based in a professional discipline and operate to
professional standards.
5. Both seek active co-operation between the two functions.
6. Both are intimately tied up with the organization’s
systems of internal control.
7. Both are concerned with the occurrence and effect of
errors and misstatement that affect the final accounts.
8. Both produce formal audit reports on their activities.

To enrich your knowledge about the internal an external audit,

read on……….
The 3 Key Models Of Organization Activities Involves
Internal And External Audit

[a]. Financial systems may be considered by the external

auditor as a short-cut to verifying all the figures in the
accounts to complete the audit process. The internal auditor
will also cover these systems as part of the audit plan.

[b]. Overall risk management arrangements are the main

preoccupation of the internal auditor who is concerned with all
those controls fundamental to the achievement of
organizational objectives.

[c]. The final accounts are the main preoccupation of the

external auditor who is concerned that the data presented in
the accounts present a true and fair view of the financial
affairs of the organization:

1. It should be clear that the external audit role is really

much removed from the considerations of the internal
auditor both in terms of objectives and scope of work.
2. External audit is a legal requirement for limited
companies and most public bodies, while internal audit is
not essential for private companies and is only legally
required in parts of the public sector.
 3. Internal audit may be charged with investigating frauds
and, although the external auditors will want to see them
resolved, they are mainly concerned with those that
materially affect the final accounts.
4. Internal auditors cover all the organization’s operations
whereas external auditors work primarily with those
financial systems that have a bearing on the final
accounts.
5. Internal audit may be charged with developing value-for-
money initiatives that provide savings and/or increased
efficiencies within the organization. This applies to some
external auditors in the public sector (e.g.
AuditCommission and National Audit Office).
6. The internal auditor reviews systems of internal control in
contrast to the external auditor who considers whether
the state of controls will allow a reduced amount of
testing.
7. Internal audit works for and on behalf of the organization
whereas the external auditor is technically employed by
and works for a third party, the shareholders.
8. The internal audit cover is continuous throughout the
year but the external audit tends to be a year-end
process even though some testing may be carried out
during the year.

Here is a list of “Internal Audit“ Versus “External

Audit“ in detail:
For further reading about auditing, you may want to
read the following entries as well: