Differences between internal and external audit
Understanding the difference between an internal and external audit is important if you want to be in control of your business and achieve constant improvement. Both are essential tools to have a clear vision of the company’s situation.
It is very common for people to feel an internal alarm when hearing the word audit, but it is necessary to understand that they only lead to something good, and that evaluations are necessary for the order and organization of a company.
An audit will show you if your business is failing in some area, performing as well as possible, or if there is still room for improvement.
In this opportunity we will explain the main characteristics of internal and external audits so that you can identify each one without problems.
The main key to understanding the differences between internal and external auditing is knowing what the intention of each one is. And while we agree that the goal will always be analysis of an entity along with bug detection and improvements, there are stark differences.
Internal audits are generally performed by resources from the same company. In general, they are carried out by employees of the entity, and are done in the interests of the organization itself.
Internal audits are not mandatory but they are very necessary.
The results acquired in the evaluation, must be useful and must provide valuable information to the members of the directors’ board or to the partners of the organization.
Some of the most important goals to mention are:
- Optimization of the internal company operation.
- More efficient and productive processes
- Clear and defined action protocols are established for particular situations that will help in the future.
- Prepare audit reports that warn of irregularities or non-compliance in the area of the company being analyzed.
It´s essential to understand that internal audits seek to achieve a result that the company itself intends to have. When requested by the company itself, the purpose is to order and check certain processes that have irregularities.
With the aforementioned, we can assume that internal auditors have some particular characteristics:
- He usually works at the company.
- It should be someone who is trustworthy and secured.
- It can come from various professional and academic areas.
- Although their interests are guided by the organization, they must be able to be impartial, independent and objective in the activities they audit
The internal audit is preventive, the evaluation is constant, and important data is thus obtained for the continuous improvement of the company.
In general, external audits are used to give information to entities or people who are not in the business world, such as potential investors, financial entities, and legal or government entities.
Some of the most important goals are:
- Report possible cases of negligence and non-compliance with the regulations that affect the analyzed company.
- Fulfill with company rules and regulations.
- Follow a path of improvement towards greater efficiency and optimization of resources.
- Provide security to shareholders and investors.
- Attract new investments
The external audit is carried out, as its name implies, by someone external to the organization.
Since he is not an internal employee, he is not as involved in the processes and how the company works on a day-to-day basis, so some more objectivity is expected.
Likewise, in both cases, the auditors must comply with total impartiality. It is necessary that nothing personal or the person´s intern aspect, affects the investigation.
The purpose is to carry out a more impartial audit, where the auditor’s gaze is not affected by any particular or personal interest that may affect the company and its evaluation.
If an irregularity is found in the process of an external audit, this can cause problems, sometimes even entails legal consequences, since they are carried out by and for external entities.
As expected, external audits are not done as frequently and continuously as internal ones, usually once a year or more.
And now what?
Now that you are clear about the difference between the two, you will be thinking that you surely need to do one in your company, right?
Here, we bring you a simple solution that you should take into account.
Today there are tools that will help you evaluate your organization in a simple way, saving time and resources.
Full Audits, for example, is an audit system for both small and large companies that want to perform their audits as well as possible.
It is a tool that will help you, through a Checklist system, to collect consistent data, which the software then analyzes in order to make the best business decisions.
Identify points of improvement and determine their frequency to then work in analysis source and solve them definitively. Thanks to FullAudits it is possible to find faults, points that we must change and that others we must keep.
If you want more information, we invite you to visit our website. You will find the best solution if you want to take your company to the next level.