Question

External versus Internal: Audit Explain why parties outside the company, such as bankers and

stockholders, prefer an independent appraisal of the company’s financial results rather than relying on

the work of internal auditors.

Answer 1

Internal auditors work within an organisation and report to its audit committee and/or directors. They help to design the company’s organising systems and help develop specific risk management policies. They also ensure that all policies implemented for risk management are operating effectively. The work of the internal auditor tends to be continuous and based on the internal control systems of a business of any size.

External auditors are independent of the organisation they are auditing. They report to the company’s shareholders. They provide their experienced opinion on the truthfulness of the company’s financial statements and perform work on a test basis to monitor systems in place.

The Stakeholders relying on the external auditor rather the. Internet auditor because Anexternal audit gives stakeholders confidence

An independent review of the financial statements can provide transparency to the shareholders that the company is being run within their best interests and can highlight any issues that have occurred which may not have been brought to their attention.