Difference
between Internal and external audit
Difference between internal and external audit can be
explained in terms of following;
1.
Appointment of Auditor
External auditor are selected or appointed by the
equity in general meeting, while internal auditor is appointed by the board of
directors.
2.
Appointment period
Internal auditor term of
office depends on the contract, the term of contract is solely discretion of
the management and may vary from one year to five year, while external auditor
are appointed for financial and after each financial year , auditor may be re
appointed.
3. Reports of auditor
External auditor are
public document and therefore publicly available, audit accounts with audit
reports also published in newspaper, while internal audit report is for management
use only and therefore not issued to public.
4. Independence of auditor
External auditor is independent,
while the internal auditor works under the control of management. Independence is
a primary requirement for the external auditor.
5. Define Scope of audit
In case of internal audit
the scope is defined by the audit committee, while in case of external audit
scope is defined by the management keeping in view the requirement of
international audit standard.
6. Termination or Removal of auditor
Internally auditor can be removed
by the management or audit committee even before the completion of term of
office, while external auditor cannot be removed or terminated by the management.
7. Form and format of audit report
Form and format of
internal audit report is defined by the management, while in case of external audit,
auditor is bound to report under the requirement of internal auditing standard.
8. Obligatory requirement
External audit is a obligatory requirement in many countries,
especially in case of listed companies, while internal audit is not obligatory requirement.
