What is internal auditng and external auditing

What is Internal Auditing and External Auditing?

I will explain first what internal Auditing is, internal auditing based on internal control. Then you confused, what is Internal Control,

Internal Control is introduced by management to fulfill these requirements.

• ·         Business Activities are going to be very smoothly and effectively.
• ·         Business Activities made according to management laid down procedures.
• ·         Secure Assets
• ·         Reveal and avoid frauds errors.
• ·         Accuracy and completeness of the financial statements.
• ·         Give the financial statements timely.

Normally internal control is a policy introduced by management to workers, employees to maintain business activities for growth of the entrepreneur.

As in internal auditing, auditors evaluate the internal control.  “How to evaluate Internal Control” is your next question I know.

Auditors perform to take evidence from internal control whether the internal control going very effectively. These test called test of controls. I will describe test of controls later. After Evaluate auditors give a report to management these areas are satisfied and these are moderate and significant.

Internal Audit report is very powerful tool to display the internal control of the company. Reporting side I will describe later.  

Then what is external auditing

External auditing based on an act approved by a parliament, act says that all PLC companies have to audit after the financial Year.

In external Auditing Auditors give an opinion on Financial Statements prepared by Management.

Financial Statements are Income Statement, Equity Change statement; Balance Sheet, Cash Flow and Other Explainers Notes.

I will give a chart to understand difference between external auditing and internal auditing.

 Description                              Internal Auditing                             External Auditing

Scope                                          Done By Management           According to act           

Objective                                    Evaluate internal control          gives an opinion on financial Statements

Obligation                                  to Management                        share holders and other parties

Appointed by                              management                            share holders

Time                                           no specific time                        normally financial Year

By Law                                       no specific law                        grant by law