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Internal Auditing is an audit exercise encompassing all the segment of business mainly initiated by the management of an orginsation to evaluate and improve the effectiveness of Internal controls and governance.It provides the managment with an assurance that helps them to run the business profitably and adhearing to statutory compliances before things go out of control.
It's a self introspection before external auditor come up with come of their find with regard to non compliance and risk of error and fraud. Internal audit can be done by the employees of the organisation or it can be outsourced to other audit consultancy firms.
On the other hand External Audit is always done by an independent external entity. The scope is defined by statute and other regulatory frame work. Mostly limited to financial statments and financial risk elements. Unlike internal auditor the external audit report is addressed to the shareholder of the company.
Internal Audit report has limited use only to the management; whereas external audit report is looked upon by many stakeholder like Shareholders; regulators, bank, tax authorities etc.
Internal audit is a function that, although operating independently from other departments and reports directly to the audit committee, resides within an organisation.
Internal audit look at key risks facing the business and what is being done to manage those risks effectively, to help the organisation achieve its objectives.
External audit is an independent body which resides outside of the organisation which it is auditing. They are focused on the financial accounts or risks associated with finance and are appointed by the company shareholders.
Audit conducted by the company's employed audited people is known as internal audit. On the other hand external audit conducted by the professional firms or institutions which is also selected by the company.
Internal audited conducted regularly but external audited is made at the end of financial year.
Internal audit is most important because it ensure compliance all the rules and regulations regarding financial transactions at regular basis.
