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Internal and External Audit (Status (Internal Employees of the…
Internal and External Audit
Status
Internal
Employees of the organisation or can be an independent entity through outsourced or co- sourced arrangement.
External
Appointed from outside the organisation (independently appointed in the public sector).
Independence
Internal
Independent of activities audited, but able to respond to the needs of management and the audit committee.
External
Independent of management and the governing body (including board of directors).
Serving
Internal
Serves the needs of the organisation.
External
Serves third parties that need reliable financial information, including shareholders (corporate sector) and parliament (public sector).
Reports to
Internal
Audit committee functionally for operations and chief executive officer for administration.
External
Board of Directors & answers questions from shareholders at AGM.
Objective
Internal
Varies according to the audit – focused on evaluating controls designed to assure the accomplishment of the organisation’s goals and objectives.
External
True and fair view of financial statements.
Focus
Internal
Forward-looking.
External
Historical events as expressed in financial statements.
Coverage
Internal
Reviews governance, risk management and control processes according to risk-based need.
External
Reviews records supporting the financial statements (periodically, usually annually).
Outcome
Internal
Helps organisation to enhance and protect organisational value and accomplish their objectives.
External
Opinion on financial statements.
Fraud & Corruption
Internal
Is directly concerned with the prevention of fraud and corruption in any activity reviewed.
External
Incidentally concerned with prevention and detection of fraud and corruption in general, but is directly concerned when financial statements may be materially affected.
Reports go to
Internal
Management and audit committee.
External
Shareholders, regulators, board of directors and audit committee.
Qualification
Internal
Not mandatory, though there is a recent shift in some jurisdictions to require the chief audit executive to have appropriate certifications and qualifications, or demonstrated high-level experience.
External
Mandatory.